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I want to start by acknowledging that things are quite tough for many at the moment, especially in my hometown of Wellington.
We have clients who have lost jobs and simply can't make their home loan payments, leading to some difficult decisions. If this is your situation, please talk to us. These are incredibly stressful times, and while we aren't miracle workers, we can certainly support you as you work through the best options for your circumstances. We have brainstormed all your options in this blog, but we are always available to discuss the options and help you formulate your plan.
The public sector is brimming with anxiety, and every day more redundancies are announced. The housing market has come to a standstill, and it is definitely a buyer's market out there. Tough if you need to sell your house, but advantageous if you're looking to buy right now.
For those of you with a home loan about to refix, my basic advice from last month still stands (in short, fixing for 6 or 12 months will likely be optimal for most). Here is what I said last month, and I believe it still holds true.
On Wednesday, 10th April, the Reserve Bank, in a brief announcement, stated there would be no changes to the Official Cash Rate (OCR). As a result, the wholesale interest rate market remained stable, as this was the anticipated outcome. It's very much business as usual. The Reserve Bank is maintaining its course, indicating that cuts to the OCR may occur in the first half of next year. However, the money markets and economists are currently predicting these cuts could come a bit sooner, possibly as early as November this year.
Although the OCR has a significant impact on your home loan rate, other factors also contribute, such as competition, wholesale rates, deposit rates, etc. Therefore, I wouldn't be surprised if some of the recent minor drops in interest rates continue throughout the year.
So, if it's time to refix your home loan, here's why you should seek advice before selecting the 6-month or 12-month rate on your internet banking app:
Free Advice: It's free! The banks will pay us to have a conversation with you before you refix, so there's no cost to you.
Tweak fixed versus floating loans: You might need to adjust the balance of your fixed versus floating loans. It could be optimal to fix some of your floating loans or to float some of your fixed loans.
Utilize surplus cash: If you have surplus cash, either on a weekly basis or as a lump sum, we need to decide how best to utilize it in your situation.
Exploring Options: If you can't afford the new repayments, we need to explore options.
Preparing for Change: If your situation is likely to change in the next year or so, we need to prepare for that now. Whether you're saving for house renovations, a car, or a trip, let's discuss it.
Switching Banks: We might be able to secure some cash for you if you switch banks.
Locking in Rates: It may be in your interest to wait until closer to the fixed-rate date. Some banks allow you to lock in a rate 6 weeks out, others 8 weeks. In a rising interest rate environment, it's generally wise to lock in a rate as soon as possible. When rates are steady or even dropping slightly, it can be beneficial to wait until closer to the actual date to ensure you get the lowest rate possible. We can discuss this with you and help you make an informed decision.
It might be that none of these considerations apply to you, but without a brief conversation, you won't know and might not make the best possible decision for your situation.
The recurring message of this blog is "Give us a call." If you're in a difficult situation, "give us a call." If you're in a strong position and want to explore options, "call." If your current fixed-rate loan is about to expire, you know what to do—give us a call!
Brendon.
About Brendon: Hi, I'm Brendon, one of the owners and advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for around 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice, I worked as a youth worker and managed teams for a not-for-profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts, I can be found running the trails of Wellington.
Disclaimer: Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see Brendon’s disclosure statement on our website.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures https://www.velocityfinancial.co.nz/disclosure-statement.