mortgage rates nz

Fixed Vs. Floating

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By Brendon Ojala

And the winner is … drum roll please … fixing! Fixing for one year to be precise. But, yes, as always, it does depend on your situation.

The good news keeps coming for those with home loans. Not great news if you have money in the bank savings accounts though.

Interest rates continue to nudge down through the month and there have been significant decreases in the three- to five-year fixed rates in particular. However, there are a number of reasons why most banks and economists are still seeing the “sweet spot” at a one-year fixed rate.

Most of our clients are fixing the majority of their loans for one year and many are leaving a small amount in some sort of floating rate (revolving credit or offset accounts) to provide for flexibility/debt reduction. In making these statements, the disclaimer of course is that every situation is different and unique, so a conversation with your adviser is key before settling on an interest rate strategy.

Anyway, here’s why fixing for one year is so popular right now:

The one-year rate is the lowest on the market and, for an owner-occupied property with 20 per cent equity, we are seeing rates of 4.1-4.2 per cent (the 3.99 specials have gone for the mean time).

The Reserve Bank governor has indicated any change in the Official Cash Rate (OCR) is likely to be mid 2020.

Again the Reserve Bank has indicated the next move for the OCR is as likely to be down as it is up.

Although noting there are other things that affect home loan interest rates rather than just the OCR, it does have a major impact.

Given the above (and of course, who knows what unpredictable market shocks will occur?) fixing at the lowest rate and having a really good chance of being able to fix at low rates in a year’s time seems like a sensible strategy for most.

Do let your adviser know before you re-fix your home loan for another period. We can get some rates from the bank for you to consider and talk through your best strategy.

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Fixed vs. Floating – What gives you better Interest Rates?

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By Graham Goodisson

 

Very little has changed with interest rates in the past six months, but can it last? Graham discusses.

 

In early February 2018, we pointed out that rates were as follows:

·         Floating rate – 5.3%

·         1-year fixed – 4.30%

·         2-year fixed – under 4.5%

·         3-year fixed – under 5.0%

 

Today, in August, it’s pretty much exactly the same. Sometimes the rates shift slightly, but mostly they are as they have been.

 

So, what’s in the forecast? More of the same?

 

Yes, probably more of the same for the coming quarter. We aren’t seeing any major changes in international markets. US markets are slowly increasing but New Zealand, as it has been for some time, is nicely positioned to cope.

 

Right then, what should I do if my mortgage has become floating. Well, if you’re not going to clear it the next 12 months then at least fix for that … longer than that depends on your personal situation and please contact your broker for the appropriate advice.

 

What’s going to happen longer term? Brexit and Trump, along with trade wars, will all obviously have an impact on the global economy and the All Blacks will on the New Zealand economy.  However, it doesn’t seem as though big changes are on the short-term horizon.

 

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Fixed vs Floating

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It may seem like groundhog again in the world of interest rates, but Brendon spells out the subtle changes that may influence your fix or float decision.

 

This month’s ANZ market commentary have pointed out that average mortgage rates have nudged a little lower in what we call the belly (two- to three-year rates) of the curve, but retained the familiar tick-shape.

 

So, from a pure “lowest is best” assessment, the one-year rate stands out. Slight movements lower in the two- and three-year rates have improved their breakeven points but not sufficiently for us to move from favouring the one-year rate as the sweet spot.

 

Longer-term rates remain very low by historic standards and offer certainty. The downside is that we struggle to see where inflation is going to come from to necessitate major lifts in the OCR.

 

To summarise all this, rates have dropped a little this month. So, if you want the cheapest rate take the one-year rate. If you want certainty, longer rates are historically still cheap. And ANZ don't see interest rates moving too much in the near future.

 

Whether you should fix or float is still a case-by-case issue. So, we don't believe it’s possible to say to all our clients as a whole, "You should do X." Many of our clients want to pay their loan off quickly, so will put a small amount on some sort of floating rate (be that revolving credit, offset or standard floating) and then fix the majority for some certainty. Others need more certainty than that.

 

As always a conversation with your friendly Velocity adviser can quickly work out a really good strategy designed with you in mind.

 

Brendon Ojala is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.