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'Don't Be Caught Out by Double Whammy'

21 May 2004

NZ Mortgage Brokers Association Urges Borrowers: 'Don't Be Caught Out by Double Whammy'

The nation's leading mortgage brokers believe that interest rates for home loans are likely to increase another 0.5% in the coming months, and that consumers need to get their ducks in a row to ensure they are protected.

"The variable rate has gone up about 0.5% since the start of the year, and we believe all rates could go up another 0.5% well before the end of 2004. There's significant pressure in the marketplace pushing interest rates up. Borrowers need to position themselves so they don't get caught out by the double whammy of higher interest rates and a softening property market," says Brian Berry, Chairman, New Zealand Mortgage Brokers Association.

He encourages borrowers to seek professional advice for their individual situations. Strategies they might like to consider include:

* Fixing their loans for a period

* Reviewing the structure of their loans (eg, possibly moving from a Principal and Interest loan to an Interest Only loan for a set period to mitigate potential cash flow problems)

* Ensuring that they have the flexibility to sell their property or properties if the need arises (especially for borrowers who have taken on significant debt to invest in property)

The Association acknowledges that interest rates are still at historically attractive levels, "but it's far easier to position yourself earlier rather than later, and more cost effective. It's prudent to do a review with a professional adviser. Now is not the time to be complacent. Specialist advice is essential," he said.

The New Zealand Mortgage Brokers Association includes approximately 600 members across New Zealand and accounts for 28% of home loans in the marketplace. NZMBA members are bound to operate under strict standards and ethics, adds Mr Berry.


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