Interest rates are starting to track up leading to significant cost implications for property investors. Some specific issues to be mindful of:
1. Why are interest rates going up?
- Interest rate markets are already pricing in a 90% chance of a rise to the OCR in August!
- The recent RBNZ comments around the Large Scale Asset Purchase (effectively money printing) are also influencing mortgage interest rates as they are now moving away from this which played its part in the reduction of rates over the last 12 months
- There are also other factors that you need to be aware of which may have a negative effect on interest rates over the next few years including banks having to hold more capital. This was on the table a couple of years back but delayed because of Covid
2. What should I do with my mortgage?
Asking questions like:
- When do your current fixed rates expire? i.e. are they all at the same time, or are they split over different terms?
- What current rates are you paying? i.e. are they reflective of today’s market rates, or should you be looking at breaking and re-fixing?
- What is your current repayment type? i.e. are you paying principal and interest, or interest-only?
- When is my interest only expiry date? In many cases, this can be different to your fixed-rate expiry date, as they are independent of one another.
There is no one-size-fits-all strategy, so the above might not be suitable for you, but it is at least worth considering what your intentions are moving forward and reviewing your existing debt position to cater to your intentions. In addition, at this time I’d definitely be recommending splitting your...
