How do you achieve good financial management?
July 05, 2012 at 2:54 PM
Takapuna, North Shore, Auckland. July 2012.
While the RBNZ Governor Allan Bollard is holding fast on interest rates and even murmuring about lowering them, this does not mean bank fixed rates won’t go up. In fact, it’s probable we will see an increase in fixed rates over the next two years.
New Zealand banks buy much of their cash from overseas, and with dour economic conditions over there – especially with the ‘austerity rebellion’ in Greece and France, – the availability of funds is reducing and therefore the cost of money is showing signs of increasing.
The good news is that the best terms aren’t dictated so much by economic conditions, as by what’s best for your personal circumstances.
For example, if you have surplus monthly cash it may be that a variable rate of interest and/or revolving credit facility as part of your mortgage structure is best for you.
My job is to spend a lot of time with you, sorting out what your personal circumstances are and what they are likely to be in coming years.
Take the example of a young couple with two incomes. At some stage it is likely you will drop down to one income when children come along. To begin with, it's good advice to plough as much as possible into the debt while you have two incomes. If the mortgage is structured correctly this will create a buffer which you can draw on if things get tougher at a later stage.
If your family has a single income and debt is at maximum affordability, my advice may be to fix a rate to secure two or three years of stability. This means you know what your payments are and can budget accordingly – even fixing for three to four years, because fixed rates are so good at the moment.
Some banks are offering specials to fix at for a year. I would advise against this, because you will come off fixed just after rates are expected to have increased and be landed with a high interest rate – be wary of marketing offers of low, fixed interest rates for short term debt.
By Christine Lockie – based out of Takapuna on Auckland’s North Shore, Christine is a mortgage and finance broker who gets results based on the personal, tailored needs of her clients.