Next Thursday the Reserve Bank decides on what to do with the Official Cash Rate which will in turn influence what the banks charge you and I.

My pick is that the OCR won’t change right now because the economy still has quite a hangover. So don’t expect the banks to do much either.

But over the last few weeks there has been a growing sense that inflation is beginning to be a problem and that has changed our perspective quite a bit. In my previous post I talked about floating rates being the most attractive/cheapest option right now. And they are. But rising fuel and food prices plus the the huge inflow of cash that’s coming in the form of insurance payouts to fix Christchurch and the influx of visitors for the RWC means inflation is going to be a real problem over at least the next 12 months.

So what? Well…

The RBNZ’s job is to keep inflation under control which it tries to do by adjusting interest rates. The upshot is that when inflation goes up, interest rates go up and so does the cost of your mortgage. So while they might not make any change to the OCR next week increases are on the cards.

My thoughts: Interest rates now are about as low as they’re gonna go which means the time to lock in a fixed rate is nigh. Maybe not for all of your loan but at least half of it. And go longish too — a 2 or 3 year fixed rate in the low to mid 6% range is pretty good value. Yes, floating rates are lower but they won’t stay down there forever. Inflation will see to that.

 

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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