Mortgage Interest Rates 2011 – Fix or Float?
Mortgage interest rates and what they are doing is always something to be aware of when you have, or are thinking about having, a home loan. Forecasts for home loan interest rates can change quickly so it pays to keep an eye on interest rates on a regular basis – especially if you are looking at buying a house, have a variable rate mortgage (or floating rate mortgage), or have a fixed term mortgage about to come off its fixed rate.
There is agreement amongst NZ economists that given current economic information interest rates will be going up sometime in the next 12 months. At the moment (March 2011) most major NZ banks economists are forecasting that interest rates will have increased by 1%, 2 years from now. How and when this increase will occur is predicted slightly differently bank to bank. Most banks are not expecting a variable mortgage interest rate rise (as a flow on effect from an increase in the OCR) until somewhere between June and September 2011 and a few banks are even suggesting that the OCR will stay unchanged until early 2012.
Given current predictions most economists are recommending to keep your borrowing on a variable or floating rate for now.
Remember though – fixed interest rates will increase well before the OCR goes up – as soon as banks economists are surer about when they think rates will increase they will start factoring this into fixed rates. So if you are looking at fixing eventually – keep a close eye on the fixed rates and economic commentaries over the next few months. And as a general rule – when you do fix - try to fix for no longer than 2 or 3 years.
Major happenings - like the Christchurch earthquake can change interest rate forecasts overnight. This event has decreased the chance of an interest rate rise in 2011 significantly and we may even now see interest rates go down.
Want to find out more about the OCR – we talk all about it in our Propertytoolbox Blog article – ‘The OCR and your home loan interest rate’.
The guys at interest.co.nz have put together a good summary of what the chief economists of the big retail banks in NZ are predicting regarding mortgage interest rates this year. Check out the article ‘Where mortgage rates and term deposit rates are headed over the next year or two and why’.
Do you want to see for yourself what the banks economic experts are saying? Here are some useful links:
At Propertytoolbox we have some advice and tips on how to make your fix/float decision. If you are after info on just what fixing and floating is - check out our structuring your home loan advice.
The Propertytoolbox Blog will be coming to you monthly in 2011 - on the first Tuesday of the month. So keep us bookmarked or in your RSS feed for relevant NZ house buyer's information!