Fix or Float - given inflation etc?

[donna]

Hi All,

What would you do right now - fix or float? Or a mix of both? I.e. some on floating and some on fixed and if on fixed what term - 1, 2 or 5 yrs?

Your input will be most appreciated....I have most on floating but am thinking I should be fixing a percentage of the loans but I'm not sure what term I should go for.

Thanks,

Donna

[drelly]

Tough call... I think OCR increases would be crazy right now. Not enough of the increase in inflation is going to be affected by any OCR raise and would just slow or reverse any recovery. I'm hoping that the Reserve bank will see it the same way! However, dogmatic thinking and a fixation on an inflation target mean an increase is likely

[WGN ex-property manager]

I suspect (cynic that I am) that the "independant" governor of the reserve bank is under presure (behind closed doors) to keep the OCR unchanged until after the election.

[Tan]

email tony.alexander (at) bnz.co.nz with 'subscribe' in the subject line to get the BNZ weekly overview. It has a section on borrowing about half way down each week and he has been pretty spot on in the past.
I don't bother with the others any more, although I do get the interest.co.nz mortgage rates daily. If they start going up I fix. That normally gets at least 1 of the 2 banks I deal with at a low rate.

It's all a game really, but it helps to win more often than not

[Bluekiwi]

Same thing I am considering Donna.
Depends on where you are at and what your plans, finances are, for yourself.
So you would need to spill some beans on that.

For me, I am in expansion mode, so fix for 2 years what I can, at a decent rate around 6.5%, then I know I fine for that period while house prices (Auckland) go up, so I have some equity to pay the piper late 2013 when I go on to a floating rate over 8%.
Plus I have 2 years to do a few flips as well and build a bit of a cash buffer to pay big interest rates if they go silly.

[Bluekiwi]

email tony.alexander (at) bnz.co.nz with 'subscribe' in the subject line to get the BNZ weekly overview. It has a section on borrowing about half way down each week and he has been pretty spot on in the past.
I don't bother with the others any more, although I do get the interest.co.nz mortgage rates daily. If they start going up I fix. That normally gets at least 1 of the 2 banks I deal with at a low rate.

It's all a game really, but it helps to win more often than not

I emailed him and he is full of s.....
Ignore his "If I was offered...." comment as it is meaningless.
There is no chance of banks dropping 2 and 3 year rates so I have no idea why he even says that.

His point, however ill put, is to stay on floating and have a better average rate than fixing 2 or 3 years.
But I think he is wrong, especially if you can get the 2 year rate closer to 6.25%.

[donna]

My current provider is offering:

6 months = 5.85
1 year = 5.95
2 year = 6.40
3 year = 6.90
5 year = 7.60 (only .10 less than what I am coming off)!

Variable = 5.75

I suppose I am concerned that as soon as there is an increase in OCR that will trigger rises in fixed rates too where I could lock in a lower rate now maybe 1 year or I shouldn't worry about it at all and leave it to market forces on the variable rate which as Tony is saying will provide a better than average rate.

Cheers,

Donna

[Bluekiwi]

Call Kris Pedersen, he will answer your question.

[Rosco]

What is the point in fixing for 1-3 years?

Won't this just bring you out when the interest rates are a lot higher, so then you will be stuck with floating at a higher rate, or have higher fixed rate options.

I personally think the only options are
1) fix 5 years - but rates seems a bit high
2) or float.

As fixing for 1-2 years won't give any more protection.

Ross

[Rosco]

Maybe 3 years could work? But will still probably end in high interest rate area, with high fixed rate options!

[drelly]

Donna, If you look in the July issue of the Property Investor magazine, there was a useful table in there about the cost of fixing as opposed to floating and what interest rates would have to go up to to make it worth while.

[donna]

Nice one - thanks very much for all your input (not advice of course)

....fools rush in aye

Cheers,

Donna

[muppet]

I have just had one loan come up for renewal.
So I got the dart board out
and
have renewed half at floating
and
half fixed for two years.
Who knew exactly two years ago
what the world scene would be like today.

[Kaye]

Depends a lot on how much your mortgage is mines lowish at 10.5% few years back was only costing me $180/week... cheap rent yes!

[Bluekiwi]

I reckon 2 years around 6.5 still beats floating.
As floating rate will likely reach 6.5% in the next 6 to 9 months.
I mean its only 3 hikes of .25 in the OCR and you are there already.