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OCR drop means time to check mortgage rates

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Contributor:
Fuseworks Media
Fuseworks Media

Now is the time to check mortgage interest rates and reconsider repayments, given today's drop in the Official Cash Rate (OCR), according to Sorted.

Sorted manager David Kneebone says the Reserve Bank's decision to lower the OCR to 2.5 percent may lead banks to lower their lending interest rates making it the perfect time for homeowners to reassess their mortgage repayments.

"If you have a floating mortgage rate, or your fixed rate is about to come up for renewal, it's worth talking to your bank. If your interest rate drops, and you can afford to keep your repayments the same, then do so. Even better, if you've had a pay-rise since you last set your mortgage payments, then consider putting that money into your repayments. That way you'll pay your mortgage off sooner because you'll be paying off more of the principal."

Mr Kneebone says increasing payments by even a small amount, or keeping payments the same, despite the interest rate change, can make a big difference to households in the long run.

"It's about keeping an eye on the banks' interest rates and thinking about changing your mortgage repayments to best take advantage of lower rates.

"Many Kiwis have experienced harder times recently, and many of us have had to take a closer look at our finances. The positive effect is that we have become far more conscious of how we're spending our money, and the need to pay off debt faster and grow our savings where possible.

"It's important that we all keep up these good habits and take advantage of financial changes when we can," he says.

On the other hand, people with savings and investments may be negatively affected by a drop in interest rates due to the OCR.

Mr Kneebone says the basics always apply; "Reduce debt fast. Save more when you can."

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