Mortgage rates are on the rise, and homeowners across New Zealand are feeling the pinch. The era of low-interest rates is over, and with the Reserve Bank's pointed noises about rate hikes, it's time to steel your nerves and prepare for a more expensive future. The conflict in the Middle East has disrupted oil shipping, pushing up prices and causing inflation to rear its head again. This, in turn, is putting pressure on mortgage rates, which are being squeezed from two directions: international markets moving on inflation fears and the Reserve Bank likely to follow with OCR hikes as early as July. So, what can homeowners do to make the most of a tough situation? First, it's important to remember that there's more to good mortgage strategy than just picking a term and hoping for the best. There are several options available, which can be adapted to individual situations to stabilize the rest of one's finances. One option is to shop around and ask your bank to match any competition. This can save homeowners thousands of dollars. Floating mortgage rates are often the most expensive option, and right now is no exception. However, if you're expecting a lump sum, such as a bonus, inheritance, or tax refund, floating lets you do that without break fees. Another option is to split your mortgage up into different fixed terms. This spreads your risk and gives you flexibility to adjust if things move faster or slower than expected. Paying more than the minimum while you still can is also a smart move. Every extra dollar you put into the principal now is a dollar you're not paying interest on for the rest of the loan. Finally, it's crucial to have an emergency savings fund that would cover three months of expenses, mortgage included, if something goes sideways. All the clever mortgage structuring in the world doesn't help if an unexpected job loss or bill forces you to break a fixed term early. In conclusion, while the world is turning to chaos and life is about to get more expensive, homeowners can take steps to make the most of a tough situation. By shopping around, splitting up their mortgage, paying more than the minimum, and having an emergency savings fund, homeowners can stabilize their finances and prepare for the future.
