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And at the time that was certainly true. Now in February 2015, the opposite can be said as interest rates are now falling!

Rule #1 - We never really know what is going to happen with interest rates.

Whether it may be an economist, a banker, an adviser, or even myself, we can't really tell what the future holds. We can make best assessments with information we know at the time. But, our conclusions can never be for certain.

Therefore, I believe it is best that you know what your options are in a reducing interest rate market.

Rule #2 - Don't ASSUME there is nothing you can do!

Over the past 17 years, the one thing I still can't understand is how passive people can get when it comes to managing our biggest financial expense: our property loans! Many people set their loans up at the time of approval and essentially forget about it. I am telling you, this approach could cost you a lot of money!

Here is an example:

Just this week, Jackie & Paul applied for 2 loans with ASB:

1. $105,500 fixed at 6.25% until March 2017 (2 years time).

This would equate to a monthly interest cost of $550 (rounded) or $13,187 over the next 24 months.

2. $230,000 fixed 5.89% until March 2016 (1 years time).

This would equate to a monthly interest cost of $1,129 (rounded) or $13,547 over the next 12 months.

These loans had been fixed for some time. But they noticed that interest rates had dropped and decided to inquire as to what they may be able to do.

There are two things you can do if you want to find out if something can be done:

1. Contact your specialist Mortgage Adviser
2. Contact your bank

I always suggest going through the Adviser channel. I know that this may come across as a bit biased given that I am an Adviser myself. However, there is real value in working with a specialist. If you didn't know, they can advise for you and instead of you paying them, the bank does!

Here's what ended up happening:

ASB quoted NIL break fee. This means for that particular day only ASB were happy for these clients to break their fixed rate contract and pay no penalty.

Here are the rates ASB offered:

5.49% for 1 year
5.55% for 2 years
5.50% for 3 years

The clients could break their rates, pay no penalty and switch to lower rates - all by emailing the bank and paying no fee!

Here are the new loans ASB gave:

1. Loan for $105,500 - refixed on the 2-year rate at 5.55%.

This equates to a monthly interest cost of $488 (rounded) or $11,710 over the next 24 months.

This gives a total of $1,476 in savings!

2. Loan for $230,000 - refixed on the 1 year rate at 5.49%

This equates to a monthly interest cost of $1,052 (rounded) or $12,627 over the next 12 months!

This gives a total of $920 in savings!

Just by thinking about it, and being active, Jackie and Paul could change their loans and save $2,396!

NOTE: The client decided to keep their previous existing loan payment (at the higher rate). This means they are actually saving a lot more, as they are making increased debt reduction payments.

I don't know about you, but saving over $2,500 seems like a good idea. So remember to be active when it comes to managing your debts!

About the author

Tracey Munns is the Co-founder and CEO of VerdiPlus and a specialist in personal wealth creation. She is an engaging energetic business person widely experienced in aspects of the financial services industry. Tracey holds a Bachelor of Commerce, is a Registered Financial Adviser and a noted businesswoman and public speaker. Her passion is to help as many people as she can to 'love their finances and change their lives'