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Fixed rates and its strange relationship with the central bank

Fixed rates and its strange relationship with the central bank

Does the OCR have an impact on the fixed rates?

Yes and no, the clip above captures some trends we have seen over the past two years. Often we will see the short term rates move and be heavily influenced by the OCR. Expectations of future OCR movements also have an impact. As well as the wholesale rates which gets influenced by funds from here and abroad navigating global economic expectations.

Could the fixed rates make an opposing move to the OCR

We can see the long term rate shift down while the OCR moves up at times during the past few years. Also at times we have seen the banks compete on a certain fixed term even without any help from the OCR. So banks will at times give up some of their margin to gain market share. They also can make good money if they make a smaller cut of a bigger pie.

What can I do?

Understand the level of certainty you require based on your budget today and future changes. At times it make sense to take a punt, especially if you have cashflow to withstand future shocks and have a time horizon where you could even out the odds. In the same sense if you have upcoming budget constraints, you may need to hedge your bets.

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