OPINION: Half of mortgages in New Zealand are set to refix over the next 12 months and many – if not all – will shift to higher mortgage repayments thanks to the incessant rise in interest rates.

If you were still hoping for mortgage rates to come down later this year, sorry – it’s now looking likely that won’t happen until later in 2024, or even 2025.

While the OCR hasn’t moved since May, banks are still faffing about hiking mortgage rates – with questionable justification – and while there’s no indication that the OCR will go up further, there’s also no indication it’s coming down again any time soon. So, we’re not out of the woods yet.

Yet despite well over a year’s worth of mortgage rate rises – and extensive media coverage – it still surprises me how many New Zealanders still don’t have a plan for how they’ll cope when their mortgage rates expire, and their repayments go up.

In the absence of knowing what to do, they tend to do nothing. Not realising that doing nothing is perhaps the most destructive course of action they could take.

When I work with a client, one of the first things I do is get them to the point where they’re able to absorb these types of financial setbacks and their financial progress doesn’t take a significant hit when conditions aren’t favourable.

But I appreciate that not everyone’s in a position where they can bear the brunt of these continued interest rate hikes – and even those who were may be starting to feel the pressure. So, if that’s the case – what are some things you can do?

One of the first things I’d suggest is to quantify the impact the increase in mortgage repayments will have on your cash flow and then put a plan in place for how this can be managed.

If you fixed your mortgage of $500,000 at 2.58% back in 2021 and are looking at having to refix that at 6.99%. That’s close to $500 per fortnight – or $13,000 for at least the next 12 months – extra you’ll make in annual repayments.

That’s a big wad of cash going out the back door when for many there was no excess cash to start.

Once I know the size of the problem, I’ll determine whether refinancing to another bank is viable and whether it offers any cash benefits – in some instances, this could offset 30% of the higher interest costs. If there is (and I’m confident my client would qualify for a refinance) I would start the process of moving them across to another bank.

Next, I’ll look to restructure the loan and maximise the mortgage term. This would artificially lower the cash payments and slow repayment progress for now – but stalling is always better than sinking.

This restructure could close the gap by a further 20% – leaving us with half the size of the problem that we started with simply by improving the systems we’re working with.

From here, we get tactical. We identify costs we can cut back on, defer, or stop completely and then we move on to lifting household income. This could include selling unused assets, renting a room, renting your house, negotiating hard for a pay rise, or opening your mind to other income opportunities. What I can tell you – these improvements don’t just happen – they require careful planning and deliberate sequenced actions.

I know the conditions are harder than before but all that means is you need to be smarter. If that doesn’t come naturally to you, then get some help. I know my clients are tracking to get mortgage-free in 10 years, even with these headwinds – but I never leave them to drift or drop anchor, especially in the middle of a storm, because doing nothing is often the most dangerous course of action.

If it’s looking like you’ll struggle to cover the increases, or want to learn to navigate these headwinds better, talk to a financial expert sooner rather than later. Whether that’s the bank, your broker, or a financial adviser, this will help you understand exactly what your options are and help you put a plan in place for how you can forge ahead.

Hannah McQueen is a financial adviser, chartered accountant fellow, personal finance author, and

the founder of enable.me – financial strategy and coaching, now part of AdviceFirst.