Is the soaring cost of living putting you under financial pressure? You’re not alone. According to Stats NZ, the cost of living for the average household surged by 7.7% in the 12 months up to March 2023. For many, the biggest worry is higher interest rates and how this affects their mortgages and loan repayments. If this is you, our Head of Mortgages, Aseem Agarwal, provides proactive solutions to combat rising expenses and secure your financial well-being.
1. Find a better mortgage interest rate
A lower interest rate, even a small decrease, can lower your monthly repayments. You can’t assume the bank you’ve been with forever is automatically the best option.
Aseem says the financial landscape constantly evolves, and better deals are often available elsewhere.
“Your first step should be researching and comparing interest rates offered by different lenders. Thanks to fierce competition, various banks may offer attractive deals including cash back @ .8% to 1% of loan amount to entice new customers.”
A mortgage broker can be your ally in this journey. As an expert in the market, they’ll give you access to deals and rates you might not discover on your own. Also, remember to ask about cashback offers, which give you a portion of your spending back in a lump sum.
2. Talk to your broker about refinancing external loans
If you have other loans (like high-interest personal, credit card dues or car loans), it’s time to have a conversation with your broker. Is there a better way to structure these loans, making them more manageable in the long run? For example, could you refinance at a lower rate or consolidate with your home loan to make them cheaper? Aseem says you often uncover significant savings by diving into all your options.
“Your broker will help you find more affordable rates or a way to roll your external loans into your existing mortgage. You’ll likely find a solution to lower overall repayments, leaving you with more financial breathing room.”
3. Clean up your budget with a financial advisor
Next, schedule a meeting with your financial/ mortgage advisor to tidy up your budget. They’ll help you review your finances, anticipate bill changes, and plan for future repayments. If you’re facing a tight couple of months, Aseem urges you not to panic but rather take charge. He says that every case is unique, so exploring the best approach and its ramifications with an advisor is the best course of action.
“People are often surprised at the available solutions. For example, many banks offer repayment holidays for 6-12 months. Your financial/ mortgage advisor can tell you what’s suitable and help you organise the deal.”
4. Structure your loan with interest rates in mind
Staying informed about interest rate trends is like having a crystal ball for your financial decisions. Aseem explains why it’s so important:
“If interest rates seem to have peaked, it’s smart to fix your loan for a shorter term, say between 1 to 2 years. Doing so allows you to take advantage of the current rates and potentially save on interest costs.”
On the other hand, if interest rates go up again, locking in a more extended fixed term say between 3 to 5 years will shield you against potential rate hikes. Remember, there’s no one-size-fits-all solution. You must weigh your options carefully and consider your financial goals, risk tolerance and overall situation.
Combat the rising cost of living with a proactive game-plan
While the rising cost of living can be intimidating, practical financial management can put you in control of your expenses. Focus on budgeting, explore competitive interest rates, and seek professional advice to find solutions that will help you weather any financial storm. With extensive knowledge of the market and a large network of lenders, Global Finance can help you make informed choices, so you can proactively manage your finances.
What you do today will determine your financial situation tomorrow. Talk to the team at Global Finance today to discuss your options.
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.