Official Cash Rate Unchanged – fix or float?

As expected the Reserve Bank left the Official Cash Rate (OCR) unchanged again this morning at 2.50 percent.

Source: http://www.rbnz.govt.nz/news/2012/4819695.html

Very much a “wait and see” update from the Reserve Bank again this morning as many had expected. Given the continuing global uncertainty and some concerning local factors such as falling NZ export commodity prices, a higher NZ dollar and slow improvement in job growth we now expect the Reserve Bank to keep the OCR on hold until March 2013. Increases in the OCR continue to be largely dependant on the global outlook and specifically developments in Europe. There is still the very real possibility that fragmentation of the European Union could trigger another global round of recession. In a nutshell whilst all this uncertainty is still playing out the chance of us seeing interest rates rising here is very unlikely. We continue to encourage our clients to be saving money now by repaying as much as possible off their outstanding loan amounts with their banks whilst these low interest rates remain available.

Do I float or fix my mortgage now? – The banks as we mentioned last time are hungry to write new mortgages to a point where they are throwing money at people to encourage them to borrow. Most banks are back to their old tactics of enticing customers with very low short term fixed rates (18 months or less) which look good today but may end up seeing clients paying more in the future. Fixing as always give you certainty with your repayments but with interest rates low and stable for the immediate future floating would in our opinion be the better option at present.

We thus see it been more advantageous to float and reap the benefit of a lower floating rate (with the discounts we can negotiate for you) and pay more off your principal where possible.

Please remember to contact us if you do want to fix or if you are going onto a floating rate as we are able to negotiate discounts that are not available to you if dealing directly with the bank yourself.