Zizi Sparks: Never a better time to re-examine debt

Now is the right time to fix mortgage rates, writes Zizi Sparks. Photo / Getty Images

OPINION

Twenty-one months ago, my partner and I signed our mortgage documents.

We were first-home buyers about $12,000 short of a 20 per cent deposit. So when we were offered a 4.5 per cent interest rate we jumped and fixed for two years.

Hindsight really is something as post-Covid-19 interest rates have plummeted and we wish we hadn't fixed it for so long. But until recently we have been happy to ride out our 24-month term as the end is in sight this October.

But the bad news is rates seem to be on the way back up.

Economics commentator Tony Alexander said in a OneRoof column a high inflation rate had led to the Reserve Bank needing to quickly take away the record low level of interest rates it introduced last year.

We are looking at the lowest rates this century. So we needed to get in quick.

This weekend we added ourselves to the long list of customers looking to break their existing fixed terms. The call wait time was more than two hours but it was worth it. We are looking to refix at 2.49 per cent for two years.

It almost halves the amount of interest we pay over the course of the loan, and if we maintain our current weekly payments it will drop the length of the loan by almost seven years.

For a few hundred dollars it's an easy decision.

I also acknowledge we are among the lucky ones. We managed to buy a home in 2019, and while the market was already on the way up it wasn't where it is now. We both remain employed, despite Covid, and always make our mortgage repayments.

But it is also easy to envy the Cooper family featured in last weekend's paper.

They bought in 2006 for less than $175,000 and paid their mortgage off in 12 years by age 35.

It is easy to grumble that their total mortgage was close to the amount of interest we are paying on ours over the course of the loan, but that doesn't change the fact they achieved what many would find impossible.

The family put it down to identifying needs and wants, paying more off the mortgage each week, and doing some DIY.

I believe everyone, homeowner or not, can learn a lesson from them.

I think often people don't or can't distinguish between needs and wants when it comes to buying things. They get sucked into sales, interest-free offers or buy-now-pay-later schemes.

There is never a better time than now to look at your mortgage or debt.

Can you get a better rate? Can you look at making extra repayments? Do you really need those new shoes?

All these little things add up to save thousands of dollars in extra interest.

So call the bank. What have you got to lose?