How to afford higher loan repayments due to rising interest rates

Actionable advice from our Head of Mortgages, Global Finance

Rising interest rates mean higher loan repayments. But, if your budget is already tight, where do you find the extra money? Our Head of Mortgages offers expert advice.

Rising cost-of-living expenses, higher loan repayments – that’s a lot of pressure on you. You do not feel comfortable.

So, creating a financial plan to get you through this rough patch? Our Head of Mortgages, Aseem Agarwal, offers practical strategies to help you meet your home loan obligations within your budget.

1. New interest rates, new strategy

If you’ve recently experienced a (potentially significant) increase in your interest rate, it’s important to reassess your financial strategy. The first question – should you opt for a fixed or floating interest rate?

“A fixed rate offers stability, as your interest remains constant for the fixed period, providing a fixed repayment and certainty during the fixed period. However, as we head towards peak interest rates, a optimum amount of floating rate might allow you to take advantage of potential decreases,” explains Aseem.

Another strategy is to split your loan, giving you the best of both worlds. By allocating a portion to a fixed rate and the rest to a floating rate, you can enjoy stability and potential savings.

Consult a financial advisor or mortgage broker who can help you create the right plan for your situation.

2. Adapt to rising repayments

If repayments have gone up while your income has stayed steady, it’s time for a budget overhaul. Look through your bank statements for non-essential expenses that can temporarily take a back seat. This will help remove some of your financial pressure.

3. Sync repayments with payday

In New Zealand, many of us receive our pay monthly, and if you’re paying your mortgage fortnightly, this can be problematic. Aseem says, “Only a week after receiving their salary, people’s accounts are often running shallow.”

That’s why aligning your loan repayments with your salary is a savvy move. It means your account stays healthy, and you have some room for unexpected expenses.

4. Ask for financial breathing room

It always helps to prepare for challenging times and take proactive steps to manage them. For example, if you’re worried about making repayments for any reason, Aseem says requesting a interest-only period or stretching term of the loan to maximum to reduce repayment to minimum can be a game-changer. If you have short term debts such as credit card dues, hire purchases, personal loans , car loans, try to consolidate and whenever possible merge with home loans. It will help you to reduce overall repayments and new repayments may fit in your budget.

Speak to your bank or mortgage broker as soon as possible to arrange a short-term solution.

5. Explore alternative lending options

It’s always worth keeping an eye on the market – especially right now. If your current lender isn’t offering the right terms, Aseem says talking to different lenders might be more advantageous.

“If you feel your bank isn’t coming to the party and giving you a good rate or lending options or minimum loan repayment ask around for a better deal.”

Make your loan repayments comfortably

The economy has been through some big changes lately. Interest rates are up, and everyday living is getting more expensive. That’s why it’s important to be proactive with your finances. Making necessary budget tweaks now will ensure you stay on top of your finances and continue meeting your home loan obligations. At Global Finance, we can help you find the smartest adjustments to suit your lifestyle and financial circumstances.

Need help creating a new financial plan? Speak to the experts at Global Finance either on info@globalfinance.co.nz or contact 09 255 5500

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.