Some clever things you can do to reduce your mortgage rate

As Registered Financial Advisers, we’re all about doing the right thing for our clients. A big part of that is making sure you don’t pay a dollar more than absolutely necessary.

Right now, we’d like to focus on one thing: Timing.

How – and when – you refix your home loan can make a huge difference to your finances. Recently, we’ve been able to help people slice hundreds of dollars from their monthly outgoings.

Take a few minutes to read our inside tips.

Tip 1. Beware of loans that need to be refixed over December and January.

The Reserve Bank takes a break over the summer. Unless there are truly exceptional circumstances – such as an unforeseen crisis in the finance markets – there will be no meetings of the Committee that decides on the Official Cash Rate (OCR) for over two months.

Since the OCR sets the baseline for bank mortgage rates, this tends to mean a pause in short-term interest rate movements. (Longer term interest rates tend to follow international markets which are less affected by OCR movements.)

In a falling interest rate environment (such as the one we’re in now), we really want you locking in the lower rates.

So what do we advise?

If your loan is due to rollover in December or January, you might consider refixing outside that window. That could mean looking at 6 or 18-month terms – or a mix of both. By contrast, fixing for 12 months or two years would mean the loan rolls over at the same time of the year again.

Alternatively, don’t refix. Some clients have chosen to leave their loan floating for a few months, and then selected a new fixed term outside the summer window. By doing this they’ve been able to lock in loan rates much lower than what were offered a few months earlier.

You should also be careful of clicking on any email from your bank that nudges you to ‘grab this great rate now.’

While it may indeed be a great rate, it’s also possible you’ll accidentally lock yourself into a fixed term just before interest rates drop. Breaking that fix could involve an eye-watering penalty.

It goes without saying that this is general advice only. Everyone’s circumstances are different, so our advice is always tailored. That’s what we’re here for.

Tip 2. Be prepared - and minimise the hold-ups.

Summer may be the season when Kiwis like to take holidays, but it can also be a busy time in the mortgage business.

There are home buyers clamouring to secure the property they’ve fallen in love with. Financial advisers like us, juggling the needs of borrowers who are looking to pounce on changing interest rates. And to top it all, the banks are struggling to keep up, due to a dearth of qualified staff.

The reality is that home loan applications these days simply take longer to process.

So what can you do?

First of all, keep an eye on your email inbox. We realise summer is a time of year when people ease off work, but if Tracey from Sue Tierney Mortgages is trying to get in touch with you, it may be because it’s time to review your mortgage or prepare for a loan refix.

Secondly, as we noted above, it can be smart practice to structure your loans so they don’t come off a fixed rate during the busy season. We can help you with that.

If you follow these tips, and work with us, we’ll manage things so you’re best placed to benefit from looming changes, such as OCR announcements. And when it’s time to go to the market, we’ll have your paperwork ready to grab the best loan for your unique needs.

Last but not least - thank you!

It’s the nature of our business that work comes in waves. The last few months have been a tsunami.

Right now, interest rates are steadily dropping. That means people are super- keen to escape the high rates they’ve been stuck with over the last few years while the Reserve Bank has been fighting inflation.

Our team has been inundated with work – which we gladly accept, because that’s how we look after our clients’ needs.

Despite being busy, we’re thrilled when we can save our clients’ money. I can think of at least one person who has reduced their mortgage repayments by over $1000…a month!

We’ll keep our shoulder to the wheel, and we’ll keep sharing any tips we know can save you money.   

Your emails and phone calls are always welcome.

At Sue Tierney Mortgages, we’re here to give advice whenever you’re thinking about taking out finance or changing your insurance.

Try us. Click on the link below to set up a call. There’s no charge.