To fix or not to fix

We are certainly being asked that question time and time again at the moment and guess what we don’t have a crystal ball that gives us the answer so the next best thing to do is to weigh up your priorities and choose the rate and the term that best suits you. So with that in mind here are some things to ponder over...

WHY CHOOSE A FIXED RATE?

A fixed rate means you’ll know exactly what your repayments are and you can budget with certainty.

WHY CHOOSE A FLOATING RATE?

Right now floating rates are lower than fixed and the cheapest way to borrow money, but will they stay that way… probably not. They are also very flexible and allow extra or early repayment to be made without penalty.

WHAT CAN YOU AFFORD?

Think about that when planning your budget and also think about the impact of rate increases on your budget and lifestyle.

WHATS THE COST OF CERTAINTY?

It’s the difference between what you will pay on a fixed rate and what you are currently paying on floating.

WHAT ARE YOUR PLANS?

Your personal plans for the future can give you a clue as to what to do, for instance if you are likely to be in a position to make a lump sum payment against your mortgage then it’s better to stay floating on that portion SO here is something to consider “A SPLIT MORTGAGE” by splitting between fixed and floating you can strike a happy balance… talk to us!

THE ECONOMIC OUTLOOK here are the facts…

• In its January review, the Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate (OCR) at 2.50%, as was expected.


• Increases in the OCR are largely dependent on the global outlook and specifically developments in Europe.


• With all the global uncertainty, at this stage the bank economists expect the RBNZ to put off any increase in the OCR until late 2012.


• It is widely expected that current floating rates will go up in line with expected OCR increases.


• By the end of next year it is expected that the floating mortgage rate will be about 1.5% higher than the current rate.
  

So, the table at the top is to help you decide on what to do and please feel free to call us for advice on splitting your mortgage...

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The views expressed in the above blog are those of the author as at the date of the blog and are based on information and sources believed but not warranted to be correct. Neither Mortgage People or the writer accepts any liability for any loss or damage whatsoever that may directly or indirectly result from any information or omission contained in this blog.