Up but down?
Inflation is looking like it could come in higher than comfortable, this coupled with the economy showing a little strength could spell higher fixed rates. The only silver lining is banks look like they are in the mood to compete. They may well give up some margin to grow their book. Also further out we might not be totally out of the woods, my personal feeling is that we are walking a tight rope, any upward pressure on fixed rates could mean the economy slows. These factors may put some downward pressure on fixed rates.
Inflation and GDP
We will see the official inflation figures at the end of this month(January) and then the RBNZ’s thoughts on new GDP figures closer to end of next month. It seems that exports are helping our economy grow out of its malaise, but it is still early days. Many businesses are probably still feeling like they are in a recession. The way this feeds into the fixed interest rates however is that they are forward looking. Depositors and speculators will start to make bets early, so growth on the horizon can mean the rewards or punishment come early.
We love fixing our rates, in some sense our banks love charging us more on the floating rates, so we kinda have to. So the actual RBNZ OCR movements can be out of touch with what we feel instantly. Case in point, the last OCR announcement was a decrease but fixed rates went up.
Best strategy?
The only certainty is uncertainty but that doesn’t mean that you always flip a coin. As competent mortgage advisers, we generally will look at the amount of stability a client needs or the amount of volatility a persons cashflow can handle. Based on that, a mix of short and long term fixed rates is generally the way to manage peace of mind. With bank competing for new clients, switching banks can at times mean a better deal.
The best strategy should take into account your current and future position.
