PHOTO: Mortgage rates will come down but not for a while. RAWPIXEL
Is there any hope on the horizon for mortgage holders in the face of the Reserve Bank’s relentless 12-time increase in the Official Cash Rate (OCR) since October 2021?
According to Frances Cook, the Investments Editor at BusinessDesk, relief is indeed forthcoming, but patience will be required. In an interview with Fair Go, she explained that as things gradually cool down, interest rates can be expected to decrease. “We’re already seeing signs of this happening,” she noted, “but it typically takes six months to a year for the effects to take hold.”
The Reserve Bank’s decision to raise the OCR from 0.25% in October 2021 to 5.5% last month was driven by their efforts to combat inflation. As a result, mortgage rates have experienced significant hikes, placing a burden on homeowners.
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Cook emphasized that there are indications suggesting that the worst of this financial strain may occur within the next six months to a year. In order to weather this period, she advised considering options such as working additional hours, reducing discretionary spending, or extending the loan term.
Mortgage Broker Jess Pronk recommended reviewing utility and insurance expenses, as well as ensuring that credit is maintained in good standing. She cautioned against making ill-advised financial decisions, such as taking on additional Afterpay or Laybuy arrangements, or inadvertently allowing accounts to become overdrawn. These actions could negatively impact one’s credit score and create difficulties when seeking additional borrowing from banks, as financial institutions possess advanced software to identify such issues.
Pronk also stressed the importance of open communication with the bank if facing dire financial circumstances or serious hardship. Despite the common inclination to ignore the problem, she urged individuals to reach out to their bank promptly, as specialized teams within banks are equipped to provide assistance and support.
SOUCE. TVNZ
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