The Reserve Bank left the Official Cash Rate unchanged this morning at 2.50 percent.
More of the same old story from the Reserve Bank. Wait and see. With all the economic uncertainty still present in Europe (and now China) any increase to the Official Cash Rate here would be wildly premature and the Reserve Bank knows it. Inflation (what little there is) remains well within the target range for the Reserve Bank’s comfort. The high Kiwi dollar continues to hurt NZ exporters and one hopes that incoming Reserve Bank Governor Graeme Wheeler may be more “proactive” about this issue.
So, should I stay floating or fix?
As far as Kiwi home owners are concerned there is little likelihood that we’ll see interest rates move away from their current 40 year lows anytime soon. The Banks have started orchestrating a campaign of cheap fixed rate specials attempting to lock in borrowers (to retain customers) but in our opinion floating still makes more sense. Again many people do not realise that with pressure from a mortgage broker like ourselves the banks will discount heavily their advertised floating rates making it usually cheaper to float at present and positioning you better to lock in a good long term fixed rate when rates do move steadily upwards. There is some possibility yet that we have not seen the end of rate cuts so anyone floating their mortgage would be the first to realise any potential reductions also.
A more likely scenario though is that the current status quo of cheap rates will be with us for the foreseeable future. As much as we favour floating at present there are some very good negotiated fixed rates now on offer and for people wanting guaranteed certainty with their repayments fixing gives them this security. As always any decision to fix or float is based on the individual borrowers own personal circumstances.
Please contact us if you or a friend or family member is looking at a new mortgage or has one due to expire. Deciding on an appropriate interest rate strategy is one of the biggest financial decisions you can make with respect to your available household income over the next couple of years. The banks are very quick to entice borrowers with a good short term or floating rate today but a lot of thought needs to be given to what interest rates will be doing in the future. We are more than happy to lend our experience and expertise to your decision and negotiate with the banks on your behalf to ensure that they give you a good deal.
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