3 Tips to Navigating Interest Rate Rises

Cost of living

 

High fuel prices, rising inflation & increasing interest rates, means many of us are feeling the pinch when it comes to our finances & the costs of living.

Having enjoyed relatively low interest rates for a number of years we are now experiencing some not so pleasant surprises when our fixed rate loan comes up for review. The hike in interest rates can result in some clients having to come up with quite significant sums each month just to cover their home loan repayments, while their costs of food & transport are still on the rise.

Although the rising costs are outside our immediate control there are some things we can do to help ourselves navigate these interest rate rises with a little more ease.

The first and potentially the most important thing is to

REVISIT YOUR BUDGET

You'd be surprised the 'money leaks' that come to light when you bother to take the time revisit your budget. Old memberships & subscriptions that you've forgotten to cancel, the mobile bill that you didn't realise has come off it's 'introductory offer' & now costs you nearly double what you signed up for. Knowing exactly where your money is going & what you have available is key to being able manage any interest rate rises. When revisiting your budget make sure your review ALL your service providers, insurances, power, phone etc. you many find that by simply 'shopping around' what can be saved here may well cover off the interest rate rises, so you don't have to sacrifice the things you enjoy.

The second thing we strongly recommend is

negotiate your rate

Don't simply accept the advertised rate your lender is offering, check if there is room to move on that rate. You maybe surprised to learn that it costs a lender more to secure a new customer than it does to keep an existing one. So don't underestimate the value of being a loyal customer.

Now, not all of us are the negotiating type, so getting your mortgage broker involved to negotiate on your behalf can be a wise move. They have the connections with lenders & know what is going on within the current market, to ensure you're getting the best possible offer.  And depending on the outcome are best placed to help you refinance if another lender has better options.

The third thing you can do is 

change your repayment frequency

Ideally you want to change your repayments to coincide with your pay cycle.  This helps with budgeting and is easier to manage.   Also if you are paid weekly and the bank allows weekly repayments this could mean a quicker reduction in the  principal amount you owe, meaning the lender has a smaller amount to charge you interest on.

Put another way, the interest payable on your home loans accrues daily, so repaying more regularly can reduce the amount of interest payable over the term of the loan.

 

These are a few ways you can navigate interest rate rises that you can easily implement yourself. There are also other options available, such as revisiting the overall structures of you loans, loan terms & types. For a more in-depth review of your lending needs don't hesitate to get in contact with the Focus Team 0800 334 338 or email info@ffgl.co.nz

 

 

 

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