March 2024

The rising cost of living, increased interest rates and a recession paint a gloomy picture for Kiwi households. But as with any downturn, upturns do follow. Our Chief Economist Jarrod Kerr and Senior Product Manager in Home Lending Richie McLay share tips on how to get through tough times.

Family on laptop

Spreading risk

Despite current interest rates being a shock to those homeowners rolling off the record lows of 2020, Kiwibank Chief Economist Jarrod Kerr forecasts that interest rates have peaked. “Rates are likely to decline in 2024, which is a silver lining for those with home loans. Hang in there, because based on a view that the Reserve Bank will cut the cash rate later this year, mortgage rates could be a full percentage point lower by the end of the year,” he said.

Kerr says many people don’t know they can split their home loan into portions to spread the risk of an entire home loan rolling over at once. Splitting a home loan into two or more portions divides the total amount you’re borrowing into smaller parts, often on different terms and interest rates.

I would advise anyone to speak to their mortgage manager and look at the option of splitting the home loan into portions on different terms. For example, part of the home loan could roll over in one year, another part in two years or four years and so on.
Jarrod Kerr, Kiwibank Chief Economist

He also recommends paying off more of the home loan when interest rates are low, to allow a buffer when rates increase. “Paying off principal harder, faster, when rates are low, helps during times of fluctuation,” Kerr said.

The second silver lining is that incomes may continue to rise, Kerr says. “The cost of living crisis may improve this year. We are seeing some signs of softer price pressures and incomes may run above inflation, so that would be a much better situation for households in 2024,” Kerr said.

The majority of our home loan customers have been resilient during mortgage rate rises so far, Kiwibank’s Senior Product Manager in Home Lending Richie McLay says.

Practical tips for managing your money

Even if you’re able to save $5 per week, you’ll be surprised how quickly your savings will grow. Saving $5 per week means you save $260 per year, plus interest in an interest-bearing account.
Helen Rietveld, Kiwibank Financial Wellbeing Coach

Maximise interest on savings

Whether you've set aside funds for an emergency, or are working towards a savings goal there are ways to maximise the interest you earn. Choosing to keep available funds in a higher interest-bearing account vs having it sit in a transactional account that doesn’t earn any interest can make a significant difference over time. Across New Zealand, Kiwi had a combined $39 billion in transactional accounts that were not earning any interest for them as of January 2024.

Which savings account is right for you?

  • Our Online Call lets you earn returns while having immediate access to your money. That means any amount of money sitting in the Online Call account can be earning interest, while still being accessed at any time
  • A Notice Saver is another great option with a higher rate of return than Online Call, but to access your funds you need to give 32 or 90 days' notice
  • Use our tool to compare rates and fees for different investment types and discover how hard your savings can work for you
  • Keen to open a new savings or investment account? Apply online today.

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