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OCR Stays the same, but should your Income Protection?

In the wake of high interest rates and financial uncertainty, securing your mortgage and income insurance has never been more crucial. As the OCR (Official Cash Rate) remains unchanged as of July 2024, the impact of recent years' rate changes on your monthly mortgage repayments might be more significant than you initially thought. Here, we explore the importance of Mortgage & Income Protection Insurance and how it can protect your financial stability, especially in today's economic landscape.

The Impact of Interest Rate Changes on Your Mortgage

The last few years have seen significant shifts in interest rates. For instance, in 2021, the average 1-year fixed mortgage rate was 2.5%. Today, it stands at 7.25%. Let's break down what this means for a typical $500,000 mortgage:

  • 2021: A $500,000 mortgage at a 2.5% rate cost approximately $1,976 per month.

  • 2024: The same mortgage at a 7.25% rate now costs about $3,411 per month.

This increase of $1,435 per month can strain your finances. However, it also highlights the need for adequate Mortgage & Income Protection Insurance.

Enhancing Your Protection

With the additional $1,435 monthly burden, you can actually increase your Mortgage & Income Protection by $1,650 per month. Here’s why this is crucial:

  • Current Coverage Adequacy: If you took out your Mortgage & Income Protection cover when interest rates were low, it might not be sufficient to cover your current repayments and living expenses. Reviewing your coverage with NZ Advice Group can ensure you are adequately protected.

  • New Opportunities: If you don't have Mortgage & Income Protection, now is a great time to maximize the amount of cover you can get.

Benefits of Mortgage & Income Protection Insurance

Mortgage & Income Protection Insurance offers several key benefits:

  • Secured Income: You can secure up to 115% of your monthly mortgage repayments as income protection.

  • No Offset by ACC Payments: This payment is not offset by ACC payments, meaning you can receive up to 80% income from eligible ACC claims plus your 115% Mortgage & Income Protection on top of that.

Why You Need to Act Now

Once the OCR rates do drop and interest rates come back down again the opportunity to increase your cover may not be there in the same way. By getting this sorted now, you can keep that level of cover in place no matter what the OCR rate does in the future.

Call us to review your cover 0800 230 235