Today, Reserve Bank of New Zealand reduced the Official Cash Rate (OCR) by 25 basis points to 2.5% Reasons cited include boosting economic growth and employment. According to some news publications, RBNZ has also warned that further cuts are unlikely – however some economists, such as those from ASB Bank may be expecting further cuts.
This will imply a fall in floating interest rates for home loans but not necessarily the fixed interest rates on home loans.
Home owners who want to take advantage of the fall on their fixed home loan interest rates, will have to keep a few things in mind before taking a decision. Firstly, will fixed home loan interest rates fall or not; and until when will they keep falling? Secondly, what is the break cost on their existing fixed interest rate home loan? Only your bank can calculate and let you know it – so you may want to check with them. The two biggest factors that make the difference to break cost are:
1. How much of your fixed loan term is remaining?
2. The difference between your fixed interest rate and the new interest rate.
For e.g. if you fixed your home loan interest for 2 years at 5% only 4 months back, it is quite possible that the break cost will be quite high to bring it down to say 4%. However, if you wait for another 3 months, interest rates could have come down to 3.85% while the loan term remaining will also reduce. At that point in time it is possible that the interest savings may be big enough to pay the break cost and fix the loan again.
However, interest rates can’t be predicted so it depends on your judgement and risk appetite as to until when you want to wait.
As for helping you calculate your savings versus break cost you may want to contact Global Financial Services on 09 2555500. We are based out of Auckland and are NZ’s top mortgage broker and adviser because we have always try to save the interest cost on the home loans of our clients. Secondly, our focus is on being proactive and providing the best customer service.
About Global Financial Services Ltd
Since 1999, GFS has been helping Kiwis realise their dreams by arranging loans to purchase their first home, investment property, business or commercial property. GFS also arranges life, medical and personal risk insurance to help Kiwis protect their life and mortgages in unforeseen circumstances.
GFS is New Zealand’s top mortgage adviser. It has arranged over $3.5 billion of mortgages and over $2.5 billion in personal risk insurance cover since 1999. Every year GFS caters to over 1,500 customers for their mortgage or insurance needs so that they can meet their financial goals.
GFS has won 28 prestigious awards & recognition including:
1. New Zealand’s top advisor awards from ANZ Bank (2012-15), ASB Bank (2014, 15) and AIA Insurance (2008-15) and The New Zealand Mortgage Mag.
2. Best customer service awards from Westpac Auckland Business Awards (Auckland South, 2015) - delivered by Auckland Chambers of Commerce and ATEED and Indian Business Awards 2014
3. Best Financial Adviser Award (Mortgage and Insurance) from BNZ INIBA awards 2015
The GFS team believes this is because of focus on savings and service to the customer. They think of themselves as mortgage advisers, and not just brokers, because they take time to understand customer needs and goals to tailor each loan to fit with their unique situation. GFS provides full assistance to its customers at the time of insurance claims. Its claim settlement ratio in respect of life insurance is 100%.