Rate hikes expected this year

What a start to 2017.

President Trump stood by his promise to withdraw from the TPP (Trans Pacific Partnership trade agreement. Its not clear what effect this would have on the economy.

Closer to home, Kiwibank has announced 2 rate increases in their mortgage interest rate since January 6. Its likely other banks will follow suit over the next few months.

For those who have fixed their mortgage rate, they are not likely to feel the effects until the fixed interest rate period ends. For those whose mortgage are up for interest rate renewal, may potentially feel the squeeze particularly if they are paying interest only.

If economists are right, they predict the long term average for interest rates is 7%.  That will not only reduce the number of local property buyers but also put considerable pressure on highly leveraged households. For those who are still shopping around for a mortgage broker, have a look at Mortgage Success

What’s the best way going forward? There are only 2 obvious answers:

  1. To be wary of overleveraging yourself. There’s a saying that goes, if you are asking yourself whether you can afford something, you probably can’t.
  2. Consider increasing your incomes by starting a side project. Check out the $100 startup (http://100startup.com/)

Luckily for property investors, they have a third option: to increase the rental to help offset increased funding costs. While this always draws media criticism and makes a good news story, it is the only option for many landlords.

 

 

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