Our flat lining OCR

From this morning's OCR annoucement by Govenor Bollard it seems our OCR is to flat line at 2.5% for just a little bit longer. Welcome news for home owners that are currently sitting on the floating rate.

The good news as quoted by Governor Bollard "the New Zealand economy has been doing better than many others... domestic economic activity has surprised on the upside and capacity usage appears to have increased. Continued high export commodity prices and in time reconstruction in Canterbury are expected to provide impetus to demand over the projected horizon."

On the other hand the bad news as quoted "the outlook for New Zealand's trading partners has deteriorated markedly. There is now a real risk that global economic activity slows sharply."

What we need to watch is the deterioration within the global financial market. Sovereign debt concerns in Europe and the, once again, weakened global outlook have caused international bank funding markets to tighten... if this continues bank funding costs for us down under will increase!

In this latest announcement Governor Bollard says that we only need global developments to have a 'mild' impact on NZ and it is likely the OCR will need to increase!

Each and everytime there is an annoucement the FIXED vs. FLOATING debate rises amongst us all...

Things to consider in the Fixed vs Floating debate:

• If interest rates rise do you have money in your budget to cover it?



• Are you on a fixed income and financially stretched as it is?



• Do you have the income to pay extra off your mortgage now?



• Do you want to repay your mortgage as quickly as possible?



• Is certainty of your budget critical?



• If interest rates increase - how far could your budget stretch?

Doing some simple calculations now may help you better understand how far your budget can stretch and what the numbers do add up to in real terms like: what does a 1% increase mean to my monthly repayments - a lot or a little? What is the term of my mortgage - can I extend it and what will that reduce my repayment to?

ADVICE
When in need of advice on your mortgage it comes down to what is right for you and your family - a good mortgage adviser should always make recommendations based on your needs and wants - the final decision to fix, float or go interest only is always yours!

Free advice is only a freephone call away, for a chat call us anytime on 0800 823 823.

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