The recent OCR reduction by the RBNZ, from 5.5% to 5.25%, has raised borrowers’ hopes for relief from high interest rates. These expectations are further bolstered by a drop in wholesale interest rates, known as SWAP rates.
Many banks had already started lowering their fixed interest rates before the OCR cut, and following the reduction, most have now also reduced floating rates by 0.25%. However, this decrease isn’t consistent across all banks.
While these developments bring some relief to borrowers, interest rates have risen so steeply over the last two years that the recent cuts have had only a limited impact.
Is lowering the OCR or interest rate the only way to reduce the interest burden on your loans?
At Global Finance, we believe that’s not the case. You can save on your loans without relying solely on interest rate cuts. Here are a few effective strategies to reduce your borrowing costs:
1. Make Extra Payments, Even Small Ones If you can afford it, making small extra payments (like $10 per week) can add up over a period of time . Any extra money, such as a bonus at work or a tax refund, could go directly toward your mortgage principal. For instance, adding just $20 per week to a $300,000 mortgage can save you thousands in interest over the life of the loan.
2. Keep Your Loan Payments the Same, Even When Rates Drop If your interest rate drops and your payment decreases from $2,000 to $1,800, continue paying the same amount $2,000 if you can afford it. The extra $200 goes toward your principal, helping you pay off your mortgage faster and saving you a significant amount on interest.
3. Take Advantage of the Global Finance Mortgage Genius Plan Our Mortgage Genius Plan® is designed to help everyday New Zealanders manage their loans smarter. This plan allows you to stay on top of your finances while increasing your financial knowledge. By using your existing capacity, you could save hundreds of thousands of dollars and pay off your mortgage sooner—without even increasing your loan instalments. While the benefits depend on your circumstances, it’s worth exploring how much you could save with the Mortgage Genius Plan®.
These strategies could improve your financial wellbeing by reducing your interest costs on your loan and achieve financial freedom faster!
The information and articles published are true to the best of the Global Finance Services Ltd knowledge. Since the information provided in this blog is of general nature and is not intended to be personalized financial advice. We encourage you to seek Financial advice which is personalized depending on your needs, goals, and circumstances before making any financial decision. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.