Home owners encouraged to prepare for changes
Home owners encouraged to prepare for financial changes ahead
The Retirement Commission is encouraging home owners to start revising budgets now to prepare for financial changes over the next six months.
Retirement Commissioner Diana Crossan said a range of factors were set to put pressure on household budgets between now and Christmas.
“On the positive side, there are tax cuts coming in October. However there are also a series of prices rises looming in the next six months that have the potential to complicate financial circumstances for many households,” she said.
“Mortgage rates are likely to rise after today’s Official Cash Rate increase to 2.75% and some are predicting further rate rises from the Reserve Bank later this year. Added to that is the uncertain impact of the Emissions Trading Scheme on prices from 1 July, and the 2.5% GST increase in October.”
“If you don’t have a household budget, now is the time to do one using the budget calculator at sorted.org.nz,” she said.
Ms Crossan said that one of the most important budgeting decisions for many home owners would be whether to shift onto a fixed interest mortgage.
“Over the past two years hundreds of thousands of New Zealand households have switched from fixed to floating mortgages because the floating rate is lower than the fixed interest rate. Historically this is very unusual and we expect that fixed rates will dip below floating rates at some stage. No one knows when though – so home owners with floating mortgages should keep their eye on the rates over the next few months and consider if the timing is right to switch a fixed interest rate,” Ms Crossan said.
Reserve Bank figures show that in April 2010 44% (617,519) of all New Zealand residential mortgages were on the floating rate, up from 26% (343,617) in April 2008.
Home owners can check the impact of interest rates changes on their household budgets by using the mortgage calculators at sorted.org.nz.