Key Facts

  • Over 40% of mortgage holders are expected to refix their loan rates in 2024 at much higher interest rates.
  • Homeowners moving from an interest rate of about 5% to 7% and higher are said to be affected by the so-called “mortgage cliff”.
  • The Reserve Bank indicates that the Official Cash Rate will likely remain high for an extended period.
  • CoreLogic chief economist Kelvin Davidson predicts that the size of rate jumps for homeowners is expected to decrease over time.
  • Mortgage Adviser Campbell Hastie suggests understanding personal finance behaviour, cutting back on expenses, boosting income, and seeking professional advice as survival strategies.

Article Summary

As we approach 2024, over 40% of mortgage-holders are expected to refix their home loan rates. Often referred to as the “mortgage cliff”, this has raised concerns as many homeowners are expected to transition from interest rates of roughly 5% to over 7%, considerably straining their finances. Those who made the shift to higher rates in 2023 are already feeling the pinch of tightened household budgets, and some will likely be unable to manage the additional financial pressure. Given the situation, the Reserve Bank has warned that the Official Cash Rate will most likely be high for a longer duration. Banks have responded by increasing their rates accordingly. Kelvin Davidson, the chief economist at CoreLogic, sees a silver lining, though. He expresses that the intensity of the rates increase for homeowners is shrinking and over time, this change will come down to zero. Mortgage adviser Campbell Hastie offers some advice for homeowners preparing to refix. They should first understand their own financial behaviour by scrutinizing their bank statements. Cutting back on non-essential expenses and exploring ways to boost their income are also essential measures. Professional help should be sought if homeowners start worrying about mortgage payments, specifically structuring their mortgages and seeking better deals on interest rates. Financially struggling mortgage-holders are advised to consult with advisers or help services such as MoneyTalks NZ, CAP Debt Help, or Good Shepherd NZ. This way, they can get advice on managing their financial situation and potentially finding a more suitable mortgage arrangement. Source Link: To read the full article, click here.