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What to do When Your Mortgage Rate Increases

Rising interest rates continue to be a hot topic as more and more New Zealanders are having to refix after the much lower interest rates on offer during the pandemic.  

With more money going out to pay off your mortgage, we can you do? We ask this question and more to our Co-Founder of Futurebound and Financial Coach, Jeff, to put your mind at ease about rising interest rates and mortgage repayments.

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So Jeff, what can we do when our mortgage rate increases?  

“As strange as this sounds, there’s good news about the mortgage or interest rate increases. This is to be expected as it’s part of a normal economic cycle which typically happens every 10 years. There are always peaks and troughs within the market and currently we’re seeing that house prices are down and interest rates are up. The good news is that it’s temporary and now that you know this happens every 10 years you can plan appropriately for this over the next one or two years when interest rates are higher than they are on average.” 

“Revisit your annual spending plan, allocate a little bit more of your income towards paying off your mortgage which may mean you’ve got a little bit less in your entertainment/clothing/hobbies budget through this time period, but better foregoing this in the short term and putting it towards paying off your mortgage and your savings, than potentially losing your house due to missed repayments. So see if you can trim some fat in the wants of your budget, also see if you can trim some fat in the needs of your budget i.e. switching power or internet companies to get reduced rates.”


My mortgage is just about to roll over, what should I do?  

“With our clients who are about to refix their mortgage, we are refinancing a lot of them instead as many banks are offering quite significant cash contributions towards your mortgage if you refinance with them.” 

Woman confused by refixing her mortgage

Is there a difference between what banks are offering at the moment for interest rates? Are some banks offering lower rates? 

“The four biggest banks in NZ are offering nearly the same interest rates so I’d focus on going with a bank that’s going to give you a significant cash contribution when you switch banks. This does usually come with rules such as you have to then stay with the bank for three years etc. In order for them to give you the full contribution so just make sure you’re aware of that. Refinancing can also be a great opportunity to put some offsetting in place and kickstart your Fast Track My Mortgage plan.” 


What if I have already majorly cut my spending down but still can’t keep on top of my repayments?  

“Many New Zealanders are currently living pay check to pay check. When you can’t cut down your spending any more than you already have, you need to come up with a new income stream or increasing your current income. When was the last time you got a raise? Could you start a side hustle? Could you sell items on Facebook Marketplace or Trade Me? Have a think about ways you could generate more money as it’s crucial that you keep on top of your repayments.”


If you’d like to get an assessment of what’s going on with your finances or mortgage, you can book in a 15 minute financial coaching chat with us and we can discuss your financial or mortgage situation, help you refix or refinance your mortgage as well as help set up a plan on how you can reduce your mortgage as fast as possible.

Keep in mind this article is providing general information and not individual financial advice. 


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