What to do if home loan interest rates are increasing
After a period of declining interest rates, there are now growing signs that rates may begin to rise again. While lower rates provided welcome relief for homeowners and property investors, the focus is now shifting towards protecting yourself from potentially higher borrowing costs in the future.
Many borrowers have enjoyed lower repayments as fixed-rate terms have expired, but with uncertainty around the direction of interest rates, it is important to carefully consider your next move.
We are seeing some homeowners who have been opting for shorter-term fixed rates now reviewing whether a longer-term fixed rate may provide greater certainty and protection against future increases. Others are choosing to split their home loan across different fixed-rate terms to balance flexibility with security.
If interest rates do continue to rise, locking in part or all of your lending now may help provide budgeting certainty and protect against higher repayments later. This can be particularly important for households already feeling the impact of ongoing cost-of-living pressures.
We are also seeing clients take the opportunity to review their overall financial position. This may include consolidating higher-interest debts such as credit cards, personal loans, hire purchase agreements and, in some cases, IRD tax arrears into a more manageable lending structure.
While your current bank may offer suitable options, many clients ask us to compare what other lenders are offering. In some cases, a new lender may provide a cash contribution that helps offset legal costs and other expenses associated with refinancing. However, these incentives generally come with claw back conditions, so it is important to understand the terms before making a decision. We always review these conditions carefully to ensure there are no surprises later.
The best advice is to speak with a financial adviser before making any changes to your lending arrangements. Breaking a fixed-rate loan early can result in significant costs, and professional advice can help ensure you choose the structure that best suits your circumstances and future plans.
Why not contact us today to discuss your options and ensure your home loan is structured appropriately for a potentially rising interest rate environment?
Work out your repayments, and what extra repayments could save, with our mortgage calculator.