The current landscape
Some economists are now introducing the idea of longer terms rates having bottomed out. The Reserve Bank of NZ has just indicated that they will bring further cuts to this year(earlier). Previously the forecasted track was a bit longer. They have not indicated that they will go lower than previously stated.
At the same time we are seeing some late summer competition the banks on the 1-2 year fixed terms.
Over the past 12 months, long term fixed rates have become higher than the short-term rates(inverted).
Short term fixed rate
Pros: Ability to pivot the structure, ie move over more chunks over to revolving or offset when the rate matures soon. Ability to take advantage of any further interest rate drops
Cons: What if rate don’t go further down? Risky if rates move the other way
Long term fixed rates
Pros: Gives you that certainty, protection against any future increases
Cons: Can incur break fees if life changes, leads to needing to pay down debt(ie selling a home or switching banks). May miss out on further rate drops.
Some long some short still the best answer? Yeah might be, but how much should you place in each basket is really based on your own circumstances. So it is still prudent to discuss this with your preferred financial adviser (I am one too).
