Mortgage Round UpDo we do have momentum?

There is no doubt that the economy is recovering, albeit slowly and on a slower basis than previous months.  Yes it’s a bit patchy with uncertainty still holding us in check but this will be the pattern for the balance of the 2010.

Economic Background
New Zealand will always feel the vibrations of any shocks overseas whether they be good or bad and currently China’s economy is enjoying strong growth to which our exports are nicely exposed. Recent highs in the forestry sector are testament to that relationship (with trees being felled it also makes it easy for me to get training logs). However we are then held back by the continuing concern in the US of a double dip recession, hence the nervousness that runs across our own market and the bumpy ride reported in the newspaper.

Despite an increase in the number of people heading across the ditch in search of better jobs, income and lifestyle, our labour market appears to be holding up relatively well. But really, why go when the Hauraki Gulf snapper fishing is on the up as we move into spring! Come on, priorities people!!

Internally our domestic economy remains weak with both housing and retail struggling against the strong head winds of you and I doing what we can to reduce debt and the renewed conscious effort of living within ones means. While these factors do work against strong economic growth today, unwinding the HP’s, credit cards and knocking the mortgage back are critical ingredients which support a long term and sustainable upswing in the economy.

You can expect property prices to remain as flat as a pancake for the rest of the 2010 with a gentle rate of growth next year which we think should be in line with inflation of about 2-3%. Interest rates will rise too as the economy picks up but again, don’t expect a dramatic change of gear. If you’re in the market, its still a good time to buy a house.

Your Borrowing Strategy
In the past two weeks we have seen a sizeable easing of midterm fixed interest rates mostly because domestic banks have had to adjust for an economy that hasn’t picked up as fast as expected. At the same time we are seeing a growing uncertainty as to the state of the European & US economies driving their funding rates back down. Regular readers will know that these economies are where NZ banks get the money they lend to you and I and the result is little difference between variable and midterm fixed interest rates on offer in Godzone right now.

On that basis, the question has to be asked: is there any reason to stay on the floating rate? Two year money at roughly 6.85% looks like decent value right now methinks.

However, if you want to keep overpaying without penalty keep some of your loan floating and go hard, fix the rest.

What are your thoughts on that? Do you have a different approach in mind?

 

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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