Mortgage Interest Rates - The Big Risk!!
Looking at www.interest.co.nz today, long term interest rates appear to be going up and up and up!
Best Rates
14 January 2009 - 1yr fixed 6.4% Kiwibank; 2 yr fixed 6.84% TSB; Floating 7.2% SBS
16 February 2009 - 1 yr fixed 5.69% Kiwibank; 2 yr fixed 5.88% TSB; floating 6.45% SBS; 5 yr fixed 6.2%
14 October 2009 - 1 yr fixed 5.59% ; 2 yr fixed 6.5%; floating 6.5%; 5 yr fixed 8.25%
So 5 year interest rates have gone from 6.2% in February to 8.25% now!! Therefore a 2% increase.
This trend and talk in the market place indicates that interest rates will increase in the long term. SO WHAT ARE YOU DOING WITH MORTGAGES?
We suggest that you talk to a mortgage broker and start thinking ahead. Here is a couple of approaches:
Aggressive
· Fix all for six months as this is the cheapest interest rates.
· BIG RISK in what will happen in six months time. All eggs are in one basket so if interest rates increase quickly, all the borrowings costs will quickly increase.
Conservative
· 25% of all loans 6 or 12 months to take advantage of loan interest rates.
· 25% 18 months or 2 years to obtain a reasonable interest rate but provide some protection long term.
· 25% 3 years.
· 25% 5 years - for long term certainty and protection.
· With the conservative approach, the loans are spread, therefore a quick increase in interest rates will have little effect.
Start thinking about interest rate changes NOW, rather then waiting until it is too late.
Ross
Looking at www.interest.co.nz today, long term interest rates appear to be going up and up and up!
Best Rates
14 January 2009 - 1yr fixed 6.4% Kiwibank; 2 yr fixed 6.84% TSB; Floating 7.2% SBS
16 February 2009 - 1 yr fixed 5.69% Kiwibank; 2 yr fixed 5.88% TSB; floating 6.45% SBS; 5 yr fixed 6.2%
14 October 2009 - 1 yr fixed 5.59% ; 2 yr fixed 6.5%; floating 6.5%; 5 yr fixed 8.25%
So 5 year interest rates have gone from 6.2% in February to 8.25% now!! Therefore a 2% increase.
This trend and talk in the market place indicates that interest rates will increase in the long term. SO WHAT ARE YOU DOING WITH MORTGAGES?
We suggest that you talk to a mortgage broker and start thinking ahead. Here is a couple of approaches:
Aggressive
· Fix all for six months as this is the cheapest interest rates.
· BIG RISK in what will happen in six months time. All eggs are in one basket so if interest rates increase quickly, all the borrowings costs will quickly increase.
Conservative
· 25% of all loans 6 or 12 months to take advantage of loan interest rates.
· 25% 18 months or 2 years to obtain a reasonable interest rate but provide some protection long term.
· 25% 3 years.
· 25% 5 years - for long term certainty and protection.
· With the conservative approach, the loans are spread, therefore a quick increase in interest rates will have little effect.
Start thinking about interest rate changes NOW, rather then waiting until it is too late.
Ross
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