The OCR increased again, what should I do?

The OCR is the Official Cash Rate, simply put it’s the rate the Reserve Bank sells money to the banks. So, if this rate changes, it has a flow on effect to the banks and mortgage rates.

The OCR gets reviewed around 7 times a year and has been closely watched recently with bigger than usual increases as the Reserve Bank tries to curb inflation.

If the OCR changes, there is usually an almost immediate effect on loans that are floating and revolving credit. The banks usually within a week or so will increase the rates when the OCR increases (or decreases).

Fixed rates can also be influenced so check what dates you may have a fixed rate due.

You should review your structures and ask yourself (and your mortgage adviser) some questions:

1. Am I getting a discount on my floating loans and revolving credit facility?
2. Do I need to fix some, or all my floating loan portions?
3. Do I need as much on floating as I currently have? (e.g. am I likely to pay it down in full in say the next 12 months, if not, then review it)
4. Are there loans that have reverted to floating that I forgot about, and I need to fix them
5. If my budget is getting squeezed, and I am paying more than the minimum payments, can I reduce the payments to the minimum?
6. What other loans do I have coming up to review? Most banks will let you lock in a new rate in advance, 30-60 days out from expiry
7. If I have fixed loans expiring longer than 60 days away, is it worth breaking the fixed rate now and re-fixing now just incase rates carry on rising. Talk to your mortgage broker or mortgage adviser about this. It may even be prudent to look at a refinance to another bank if it will put you in a better position. Often banks will pay you cash back to change, but you do need to be wary of the cost to change banks also.
8. Now may also be a good time to review your living costs and budget. Are there expenses that need reviewed, subscriptions that need cancelled, surplus stuff at home you can sell, time to ask for a pay rise, plan for future major expenses such as a holiday or renovation
9. Is there anything else I can do to improve my position and lock in some surety?

Now is a good time to have a mortgage adviser on your side like Craig Pope Financial.