What to do when interest rates decrease

When interest rates decrease, homeowners and prospective buyers throughout New Zealand have a lot to consider.

A decrease in the Official Cash Rate (OCR) often leads to lower bank home loan rates, presenting opportunities for borrowers of all kinds.

These questions can help you decide what to do when rates drop.

What are my financial goals?

Your response to lower rates will depend on your goals, so understanding what you want to achieve is key.

If your goal is to boost your savings, you might look at ways to cut expenses. Planning to buy property? Taking advantage of lower rates could make it happen sooner.

As a home owner should I keep my repayments the same?

An interest rate decrease could see your home loan repayment reduce, putting extra cash in your pocket for savings or expenses.

However, maintaining your current repayment amount could help you pay off your loan faster by reducing the principal more quickly.

How is my home loan structured?

Reviewing your loan structure when interest rates drop could be a smart move. Take the time to assess if your current structure needs to change to keep up with your situation.

If you’re thinking of switching to a lower rate before your loan term ends, your Mike Pero Mortgage Adviser can estimate the costs and explain how changes affect your loan.

Should I shift to a split loan?

Depending on your circumstances, splitting your home loan into fixed and floating rate portions could offer both stability and flexibility.

This approach allows you to take advantage of lower rates in the market while the longer-term fixed rates provide certainty.

What’s happening in the property market?

Lower interest rates can stimulate the housing market, leading to more homes for sale and increased buyer activity.

This can create more opportunities for both buyers and sellers, so it might be a good time to put your property plans in motion.

Who can help with next steps?

Asking these questions can help you make informed decisions.

Speaking with a Mike Pero Mortgage Adviser can offer clarity and help you explore your options.