The bank has released its latest home loan report, which predicts more increases in mortgage rates over the rest of the year. Rates have lifted over recent months from their lowest levels on record.
ASB’s economists have warned borrowers to brace themselves for rate rises, and higher repayments. “Our forecasts suggest more increases are coming for mortgage rates over the rest of the year,” said Chris Tennent-Brown, senior economist at the bank. Though that meant home loan borrowers would face higher repayments, mortgage rates were not expected to return to pre-Covid levels.
Borrowers could obtain certainty, and a significantly lower rate by fixing their mortgages rather than having a floating rate mortgage. Generally, they have fixed their loans over short one and two-year periods, and then refixed for the same terms once the original terms came to an end. This provides interest rate certainty for the next few years at a slightly higher cost than the cheapest rates. For those who want this longer-term interest rate certainty now, the cost of fixing for two to five years is still very low compared to the past 20 years.
On top of trying to minimise your interest payments, a good mortgage strategy also needs to take into account your personal cash flows, tolerance for uncertainty, and your ability to deal with changes in future mortgage payments as interest rates change. Everyone’s financial circumstances can change, and you need to take this into account too advised Tennent-Brown.
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