Bay of Plenty homeowners anticipate refixing mortgage rates

A Bay of Plenty homeowner says the latest increase in the Offical Cash Rate has “really thrown a spanner in the works”.

Zachary Brown, 27, who works as a media specialist for NZME, the publisher
of the Bay of Plenty Times and Rotorua Daily Post, bought his first home, in Tauranga, with partner Daisy Warren, 25, at the end of 2021.

Their two-year fixed mortgage rate was due to be refixed in December this year.

Brown said Wednesday’s announcement that the Offical Cash Rate (OCR) was rising to 5.5 per cent would impact on their plans and had “really thrown a spanner in the works”.

The couple had planned to live in the house for “two or three years” to build financial equity before reselling. Brown said with interest rates increasing, this plan was now unlikely.

He said the “silver lining” was that rates were not expected to go any higher.

Brown said they were planning to build a self-contained unit on their property.

“We are grateful to have the money to do this as, obviously, some people don’t”.

Brown said he wanted to be able to live a comfortable lifestyle but with interest rates increasing, it may be “a case of cutting back” if needed.

Westpac and ASB both made changes to their home loan rates this week after the Reserve Bank’s announcement.

ASB’ announced its housing variable rate would move from 8.39 per cent to 8.64 per cent, while the Orbit home loan rate would increase from 8.49 per cent to 8.74 per cent

Westpac increased its standard six-month and one-year rates to 7.69 per cent and 7.59 per cent respectively. Its three-year rate would increase to 6.69 per cent but its two-year rate would drop to 7.05 per cent. Its floating rate would increase to 8.64 per cent from June 1 for new customers, and June 15 for existing customers.

Tauranga couple Brooke Pickens and Blake Horne, both 23, took the latest OCR hike in their stride.

They settled on their two-bedroom home this year and moved into their property a month ago.

“We still have leeway room to move. We wouldn’t have bought into a house if it pushed limits with interest rates,” said Pickens.

She is a support worker and Horne is a builder. The couple were not “big spenders” and that had helped with saving for their first home, Pickens said.

“We’re not big drinkers. I can’t remember the last time we partied. We have a healthy lifestyle of the gym and beach walks. Our activities are free things.”

She said budgeting helped them save for their home and she was not concerned about financial hardship in the future.

“If you buy a house at 23, you can get through anything,” she joked.

“Worst-case scenario, I can ask for more hours at work, or there are more options like getting a second job.”

Rotorua mortgage broker Sally Copeland said people refixing at higher interest rates should focus on what they could control.

“No one knows what will happen in the future”.

Copeland had seen her clients affected by inflation. “We find when people take the time out of their day to get professional advice, run through the budget and put a plan in place, this can make people feel in control of their finances.”

She said it was important to look at home loan structure at a personal level of certainty for “your own specific financial situation”.

Considering how much “risk” they could take if interest rates went up was important for individual homeowners.

She hoped banks would take into consideration the level of inflation and provide a blanket of relief for homeowners similar to during Covid-19.

This would give homeowners breathing space during this time, she said.

Tauranga mortgage adviser Brooke McGougan said banks “pre-empt” interest rate increases. “It may impact floating rates,” she said.

McGougan said homeowners should prepare for the future by pre-planning for fixed rates to go up. “Get in touch with your mortgage broker with where the rates are tending to go.”

She said it could help to have a fixed-rate mortgage plan to remove “scrambling” when this is due.

McGougan believed the OCR would drop in the future.

Rotorua financial adviser Keith Munro said “tightening belts” was important for homeownersduring this time.

An ANZ spokesperson advised customers who were looking for reassurance or support as interest rates rise to talk to their bank sooner rather than later.

They said the bank closely monitored how their customers were managing their loans. “

As people come to refix their home loans, we’re contacting them to make sure they’re aware of the option to manage repayments and offer reassurance and support for those who need it.”

ANZ said around 35 per cent of ANZ customers currently had home loan rates lower than 4 per cent, with around 40 per cent of those customers not rolling off these lower rates until 2024 and beyond, providing them with additional time to prepare for higher rates.