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Prepare For Rising Interest Rates


Rising interest rates Whanganui Mansions

Mortgage interest rates are starting to rise and are likely to rise even further as inflation starts to increase and the Reserve Banks moves to reduce the effects of inflation. This may be a real concern for many people looking for real estate Wanganui and in other parts of New Zealand.


The Reserve Bank says "The economy was strong going into lockdown, but the spread of COVID-19 poses risks" and that "Demand for workers is robust and businesses are finding it difficult to get the workers they need". The price for goods and services have increased by 4.9% in the past year, which is above the Reserve Banks target of 1-3%.



Reserve Bank of New Zealand Building Whanganui Mansions


Governor, Adrian Orr said, "Headline CPI inflation is expected to measure above

5 per cent in the near term before returning towards the 2 per cent midpoint over the next two years." In late November 2021, the Reserve Bank Committee increased the Official Cash Rate (OCR) to 0.75% and one would expect this to affect Wanganui real estate prices.


MORTGAGE REPAYMENTS


It is always a good idea to calculate what your mortgage repayments might be in the future. This will give you a chance to start making a few cuts here and there so you can find the money you will need for the extra payments. Traditionally, 5% has always been a good figure to base your calculations around but there are no guarantees. In the 1980s interest rates were at 21% in New Zealand.


FIXING YOUR MORTGAGE RATE IS AN OPTION


Depending on your circumstances and what the future holds for you personally, it may be a good idea to start fixing the rate on your mortgage. For example, you may know that over the next few years you are likely to have a wage increase which will make mortgage repayments more affordable in the future. So fixing may be a good option for you.


But always check what costs will be involved with breaking an existing mortgage just to fix your rate. There are often high break fees so you really need to do your homework first and talk to your current mortgage provider.


About the Author


​​Steve Baron is the Founder & CEO of Whanganui Mansions. He is a former successful real estate agent and property investor when based in Auckland and formerly the Managing Director of Baron Marketing Ltd, an advertising company he founded and ran for over 20 years.


He is a past mentor for Business Mentors NZ and holds a Bachelor of Arts Degree from the University of Waikato Majoring in Economics & Political Science. He also holds an Honours Degree from Victoria University of Wellington in Political Science.


He is a published author of three books and a prominent guest editorialist for newspapers throughout New Zealand. In his spare time, Steve is the Clerk of the Scales for New Zealand Thoroughbred Racing, is a Bridge Grandmaster and enjoys walking, running and cafes.







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