Need for households to review finances following OCR rise

Kiwis need to focus on their financial planning more than ever before, following today’s rise in the Official Cash Rate (OCR), according to the Retirement Commission.

Manager of sorted.org.nz, David Kneebone, says the pressure on household budgets is coming from a number of sources and it’s important people are aware of financial changes and prepare for them.

“On one hand there will be cuts to income taxes. But on the other, there is the impact on petrol and energy costs with the introduction of the Emissions Trading Scheme, and further price increases are only two months away with the 2.5% rise in GST. New Zealanders now also have to pay more in ACC levies, and car registration fees have increased as well.”

“On top of these hikes, we’ll be watching the banks to see if mortgage rates rise after today’s OCR increase to 3%, as is traditionally the case when the OCR rises.

“Don’t be one of the people, come November/December, who is surprised by these changes and possibly caught short financially. We know changes are coming, so it makes sense to plan for them by doing a budget. Sorted.org.nz has a Budget calculator that makes this easy,” he says.

Mr Kneebone says that one of the most important budgeting decisions for many home-owners is whether to shift to 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 interest rate is lower than the fixed rate. It’s worth keeping an eye on your bank to see what’s happening to your mortgage rate,” Mr Kneebone says.

Reserve Bank figures show that in May 2010 46% (628,836) of all New Zealand residential mortgages were on a floating rate, up from 26% (343,357) in May 2008.

Home-owners can check the impact of interest rates changes by using the mortgage calculators at sorted.org.nz.