RBNZ leaves rates on hold after 12 consecutive hikes

The Reserve Bank of New Zealand (RBNZ) has left the official cash rate (OCR) at 5.50%, following 12 consecutive hikes.

According to the RBNZ, “'the OCR will need to remain at a restrictive level for the foreseeable future, to ensure that consumer price inflation returns to the 1-3% annual target range, while supporting maximum sustainable employment”.

Despite the hold, rates are still high, as is inflation, leaving many homeowners looking for ways to save costs. One option is debt consolidation, although it may not be right for everyone.

Why consider debt consolidation?

Debt consolidation is where you roll multiple debts, such as personal loans, car loans and credit cards, into one account. This could help simplify your repayments as you would have one rather than several to make. It could also potentially save you money if the consolidated debt was charged a lower interest rate than when the debts were separate.

There are a number of ways you could consider consolidating debt. These include combining it into one personal loan or adding it to your home loan. 

Key considerations before consolidating debt

Debt consolidation can be very beneficial, however there are a number of factors to consider before doing so. The main questions to ask include:

• Are there any fees for paying off any of the debts early?
• Are there any application, legal or valuation fees?
• Are you comfortable with the security? If you rolled unsecured personal loans or credit cards into your home loan, your home would be used as security, meaning the lender could seize your home if you were unable to keep up with the repayments.
• Will the new debt have a longer loan term? This could mean paying more interest over time.
• Can debt consolidation impact your credit score? Your credit score may be impacted in the short-term if you apply for multiple loans. However, if you consolidate your debt and consistently make your repayments, your credit score may eventually improve.

Why see a mortgage adviser about consolidating debt?

As you can see, debt consolidation can be an effective way for some people to save money and make repayments simpler. However there are a number of considerations to ensure it is the right strategy for you. 

I can help you decide whether debt consolidation is right for you, by taking the time to understand your situation and goals, and crunching the numbers. If you decide to proceed, I have access to over 20 lenders to find one that suits your needs and offers a competitive rate.