Management INSIDE THEMarket Tips for Dealing with Rising Mortgage Rates

Rising interest rates are bad news for first home buyers and borrowers alike, with new homeowners and investors (those who bought homes in the last 18 months) facing much higher mortgage repayments for the first time. With the Reserve Bank of New Zealand signalling further interest rate hikes are on the horizon, how can we avoid placing strain on already tight budgets and stay on top of bigger mortgage repayments?

Here are some options:

1. Check what mortgage you are currently on

In our local market, we are observing signs that suggest we may be approaching the bottom of the price cycle. Although there is no immediate indication of rapid price increases, the available evidence points towards a stabilisation of prices and the potential for future growth. This sentiment is supported by the Reserve Bank’s indications of potential changes to Loan to Value Ratio (LVR) rules and the watering down of Consumer Credit and Corporate Conduct (CCCFA) changes. These factors have led to increased attendance at open homes, higher participation in auctions, and more parties involved in multi-offer situations.

The first step is to determine how your current mortgage is structured, as interest rate increases will affect the floating portion of your home loan, as well as any fixed interest rate terms that are ending that are going to be refixed.

One notable trend is the resurgence of first home buyers, indicating a renewed interest and involvement in the market. However, we have yet to witness a significant impact from investors, as there is speculation that they may be waiting for the outcome of the upcoming election before making significant moves.

If you’re not sure how your home loan is structured, contact your lender or mortgage adviser to help you work through the details. It’s worth booking in a home loan restructure checkin with a Mortgage Express branded adviser, to ensure you’re getting the best deal available to you, and that your home loan is structured to fit your requirements.

2. Determine how interest rate increases impact you

Now that you know how your home loan is structured, your mortgage adviser can help you determine the impact any interest rate rises will have on your home loan repayments. You can also use a home loan repayment calculator – like this one – to work out what your repayments are going to look like.

If your fixed rate term is nearing the end, now is a good time to discuss with your mortgage adviser locking in an interest rate. It’s also worthwhile comparing how your interest rates stack up against any other deals in the market, and this is something else your mortgage adviser can help you with.

3. Devise a plan to help you manage higher repayments

The Reserve Bank (RBNZ) has warned that a noticeable number of households that borrowed for the first time in 2021 will find it difficult to pay their mortgages and cover all their other usual expenses. If you’re in this situation, start building up a savings buffer now to help you manage the higher repayments you are going to face in the year ahead.

Take a close look at your budget to identify the expenses you can cut out or ways in which you can boost your income. Check that you’re getting the best deal for utilities – power, internet and phone – and pay down any high interest debt as soon as you can to help free up extra cash to divert into your home loan.

Get expert advice about your financial situation

With more interest rate hikes predicted, it’s important to have a financial plan in place to help you cope with higher mortgage repayments. As well finding ways to cut back on unnecessary spending, building up a savings buffer could help you prepare for higher costs ahead.

If you’re concerned about the impact higher mortgage repayments could have on your financial situation, it’s best to seek help immediately. Contact your mortgage adviser or lender to discuss your situation before you miss any repayments.

Contact a Mortgage Express branded adviser if you have questions about your existing home loan and the impact higher interest rates could have on your financial situation.

Source: https://www.mortgage-express. co.nz/blog/rising-mortgage-rates

How to make your home more cosy this winter

As the days get shorter and the chill in the air becomes more noticeable, we tend to spend more time indoors with family and friends, so creating a warm and inviting home is a priority. Make sure your home is a cosy haven with these tips.

Get cosy underfoot

Hardwood floors are ideal in summer, but during the colder months cover yours with a thick, lush rug. And don’t forget to leave your slippers by the door so you can pop them on as soon as you get in to instantly feel more relaxed and at home. In the bathroom, make sure you always have a bath mat laid out so there’s no cold feet post-shower either.

Eat comfort food

On a cold winter’s night, salad is no-one’s friend! It’s the season for soups and slow-cooked dishes, which are perfect for anyone who wants comfort food with minimal fuss.

Rethink your lighting

Due to less daylight hours, changing bulbs to warmer LEDs and adding lamps throughout the house is vital but especially in the bedrooms and living space.

Soft candlelight also gives another layer of ambience to a room and is also your best friend when it comes to flattering lighting. If your living room has a fireplace, use it as your primary source of light during the colder months.

Create a cosy couch or bed

We all spend a lot of time during winter curled up on the couch, so make sure it’s comfy and snug. If you have a leather couch, cover it with a warm throw to take away the chill and make the room more inviting. Having a couple more warm blankets at arm’s reach is also essential! A faux-fur throw is a great investment for your bedroom. Casually drape one across the end of the bed during the day, and add it as a bedding layer during the night.

Add curtains

Kiwi homes came late to doubleglazing, so adding a second layer of insulation with curtains is more our style. Good curtains can reduce heat loss by up to 60% for single glazed windows, and 40% to 50% for double glazed, and reduce drafts.

You will often hear the phrases “Time in the market beats timing the market”.

Here’s why time in the property market doesn’t beat timing the property market is flawed.

First the quote “Time in the market beats timing the market” was made in relation to investing in the stock market (not the property market) by Ken Fisher (an American billionaire investment analyst, author, and the founder and chairman of Fisher Investments).

His point is that typically people invest small amounts of money in the stock market on a regular basis (i.e., monthly) over a long period of time. This concept of regular smaller investments is called dollar cost averaging. This means sometimes you will be buying stocks at their cyclical lows and other times at cyclical highs, but the average cost per stock smooths out the ups and downs. This is a risk minimisation strategy to prevent buying all, or a lot of, stocks at a cyclical high. So, in that regard timing is not important.

Second in property it’s not a race between time in and timing because when it comes to property investment most people typically invest large amounts of money on an irregular basis so in the case of investing in property timing really does matter, a lot. If you only invested in one property every 5 years or so you probably wouldn’t want to make that property investment purchase at a particularly high point in the property cycle or just before the slump arrived.

“Timing in property compliments time in property, it doesn’t replace it”.

Timing, when it comes to investing in property, is not what most people think it is. Most think it simply means just picking the so called bottom or top of the property market. That view is an oversimplification and evidence of a lack of research. It is like a “kindergarten view” of timing when it comes to the property market.

Timing in property is so much more complex than that, but you need the context of entire property cycles to grasp the importance of timing and to understand it’s context when it comes to property investment. You can only appreciate the nuances of timing the property market when you look at it through the lens of the traditional decade (or two) long entire property cycle.

- KIERAN TRASS