Get expert advice to fix or float rates

The current mortgage interest rates on offer from banks would get even better when you find out that discounts up to .075% is not unusual for certain types of borrowers.

How long can this continue? Will we have ample warning of rising rates? Will rate fall further?

These questions engage the thoughts of minds of many borrowers.

Rightly so; because interest rate movements affect our cash flow.

There are a number of opinions on this issue. A majority of bankers and economists believe that the Reserve Bank of New Zealand (RBNZ) would raise the Official Cash Rate (OCR) at least by 1.5% over the next two years (2014).

RBNZ officials believe that the economy would experience growth without high rates of inflation in the coming years. As we are aware, higher the inflation (that is higher cost of living) would mean higher rate of interest in the short term.

Some issues and developments such as rebuilding Christchurch and inflow of overseas investment may point towards inflation but the scenario is not clear.

Market anxiety

Right now, nobody is in a rush to fix their mortgage rate, probably because of heavy discounts offered by banks. The converse is also true – when interest rates start moving up, people would rush to fix their mortgage rates.

Is it time to fix your mortgage rate? Based on the observations of economists and experts, it may appear so. But market trends and economic variables, which have an impact in the long run, are often overlooked.

Our clients are leaning more and more towards fixed rates, usually for a period of two years or longer (three to five years).

If you are considering fixed rates for a longer period, you should take advantage of the existing opportunity and enjoy the ‘season of big discounts.’

Talk to us, you would be surprised!

Repaying the principal amount of the loan faster is always desirable to achieve the benefits of lower interest rate and be free of debt.

Some people tend to get carried away when looking for rate discounts but it is interesting to note that 0.11% discount on $300,000 works out to $333 for a year, while additional payments of $31 per week can save almost $70,000 over the long run.

Hamish Patel is an adviser for mortgagesonline.co.nz and can be contacted on (09) 6254693. Email: hamish@monline.co.nz

The above should be taken only as a guideline and not as specific advice. A full disclosure statement is available on request.

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