Quality advice: a powerful tool for Kiwis in 2023

While we’re all looking forward to less troublesome times, there’s peace of mind in knowing that Kiwis have experts to turn to, in times of need. And in this spirit, here are some key areas where insurance advice will prove invaluable in the new year.

Mortgage rate hikes

In 2021, we started seeing mortgage rates reverse their direction after years of mostly steady decline.

As widely expected, rate hikes continued throughout this year, and the latest Reserve Bank’s decision in November confirmed that they still have further to go. Apparently, there was a lot of thought behind the latest hike: at 0.75%, it’s the biggest OCR rise ever, but the committee said they had also considered a full 1% increase.

It goes to show just how persistent this inflation is, not just here but all over the world.

Meanwhile, New Zealand homeowners are feeling the double pressure of rising consumer prices and higher mortgage rates. And unfortunately, more increases are likely. Analysts at CoreLogic expect fixed-term mortgage rates to push towards 7% or higher, which would see many Kiwis’ financial positions deteriorate in the next few months.

At times like these, insurance advice can be a lifeline. By reviewing their financial safety net with the help of a friendly adviser, Kiwis can make sure they have enough insurance to cover those extra costs if need be. And importantly, they can bridge the protection gaps that may have widened in these shifting environments.

Rising cost-of-living

Besides interest and mortgage rate hikes, high inflation means that the cost-of-living is rising across the board. At 7.2% (as per the September 2022 quarter), inflation hasn’t yet outpaced the average wage growth yet, keeping consumer spending afloat. But while this may sound like good news, until the economy slows significantly, inflation won’t dissipate and interest rate hikes won’t stop.

In the meantime, not everyone is benefitting from wage growth. Households whose wages are not keeping up with price rises have seen their real incomes and savings shrink. Not only is their capacity to save and repay debt diminished, but those who don’t have an emergency fund have to take on more debt to get through it. In November, Centrix revealed that consumer debt was climbing to pre-pandemic levels, and 2% more active borrowers were behind on repayments compared to a year earlier.

So now more than ever, Kiwis need support to build their financial resilience. A timely conversation with a financial adviser can help people take an inventory of their present situation and gain all-important financial awareness. What’s more, they can be proactive rather than reactive. And by accessing resources and information that would otherwise be out of grasp, they can make informed decisions with guidance from someone they can trust.

Emotional strength and financial confidence

Just like wealth is not just a number, financial concerns can’t be reduced to percentages and flow charts. In fact, studies show time and again that money worries have a ripple effect on people’s long-term goals and even their personal health and wellbeing.

For example, we know that when property prices rise, consumer confidence is boosted because homeowners feel wealthier. On the other hand, a softening property market, coupled with rising interest rates, can have a deep impact on consumer sentiment.

The bottom line is that, when emotions run high and financial stressors become more dominant, the need for clear thinking informed by impartial evidence is greater than ever.

By providing clients with a good understanding of their finances, insurance advice and financial advice at large can have a significant impact on people’s confidence and outlook. It’s easier to feel optimistic about the future when you know that you have your most likely risks covered; that your investment plan is aligned with your risk profile and long-term goals; and that your mortgage is structured in the most cost-effective way.

Kiwis need this guidance now. And most importantly, they need to hear that ‘this too shall pass’.

We’re here to support you.

At Financial Advice NZ, we’re here to provide financial advisers with the tools they need to provide the best possible service to their clients. Visit financialadvice.nz to learn more about our adviser support and resources.