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Increase in the Official Cash Rate may impact older renters

The recent increase in the Official Cash Rate may impact older renters.

Age Concern New Zealand Acting Chief Executive, Robert Ross says that “the recent increase in the Official Cash Rate and its consequent impact on mortgage rates is likely to have a long-term affect on older New Zealander’s occupying rental property.”

Almost 20% of over 65 year olds occupy rental property. Those who rent and are also on a fixed income are in all likelihood, the most affected in the long term by this increase, as rents tend to rise with mortgage rate increases.

Renters are not the only ones affected however; “Any increase in interest rates will be unfavourable to those superannuitants who have a mortgage, as the mortgage rate will undoubtedly increase. The combination of an ageing population and rising house prices means there are a growing number of retirees in this category,” says Mr. Ross.

On the other hand, any increase in interest rates is good news for older New Zealanders who have savings.

Approximately 20% of retirees live mainly on NZ Superannuation plus a small amount of savings. Those retirees that do have additional savings will welcome the rise in interest rates

Although, if their savings are invested in a fixed term deposit, they will have to wait until the fixed term matures, before reinvesting at a higher rate.
Approximately 40% of retirees live on NZ Superannuation alone and have no savings, so will not benefit from the recent increase in savings rates.

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