Lower Hutt

New Zealand 5010

0210329573

karen.kiely@raywhite.com

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Stay fully protected by updating your ‘sum insured’

Stay fully protected by updating your ‘sum insured’

Andrew and Kelly bought their property when the changes to ‘sum insured’ insurance were announced last year. They insured their property for a certain sum, which a valuer assisted them to reach. Since that time they have undertaken significant renovations to their property, including a new kitchen. The property would cost more to rebuild now than it would have when they set up the policy.
Sum insured is the new way of insuring property in New Zealand. This means that your home is insured for a maximum specified amount, being the amount your insurance company will pay towards rebuilding your home if it is destroyed.
While it is very important to ensure your sum insured is correct when you buy a property, you should also consider whether it is still current in the following circumstances:

• When making alterations to your property;

• When making alterations to your property;

• When adding special features to your property, like a pool or new retaining walls;

• Otherwise, when your annual renewal notice comes out.

WHAT TO DO ABOUT THE RISING INTEREST RATES

In a recent overview of the mortgage rate increases, Tony Alexander, Chief Economist BNZ had some advice for younger borrowers who had never experienced anything but the current historically low interest rates. This is an extract from that article.
What should you be doing about this coming period of rising rates, rising frustration, increasing clamouring for radical solutions which have no hope of being adopted let alone being effective, even were there a change in government? Get your debt down. Cut your spending on cafes, technology, travel etc. Hedge your risk with some debt floating, some fixed at potentially a range of terms. Nothing you do will stop your interest cost going up short of getting rid of the debt. If you fix now for five years at 7.2% you take the rate rise now.

Note that floating rates will be at about that level in a year’s time in all probability. Good luck. You’ve recently had the benefit of a level of interest rates those of us who paid 18.5% for their floating rate mortgage when getting it in 1987 then 15.5% for a one year fixed rate only ever dreamed of. Plenty of people were paying over 20% for a while. Of course back then average house prices were just over three times average household incomes versus over seven times now. Swings and roundabouts; were I borrowing currently I would fix three years at least.

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