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Warning: Interest Rates Are On The Move

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Brian Dalley
Brian Dalley

ASB have increased their 12month, 18 month and two year rates however their six month and floating rate are still at an all time low.

Have the economists got it wrong? Are we going to be left stranded in the middle of the road like possums blinded by car headlights not knowing which way to run?

Is it now time to fix short term or, should we fix for the long term or, just stay where we are, on floating.

Yes for the next few years it is going to be back to making decisions based on what we see out the window rather than speculate on long range forecasts with no guarantees. If it looks like rain take an umbrella, sun, maybe a hat. A 50/50 [ split the lending ]  call is likely to be a popular option as for the next few years it is likely to be cloudy most days.

Long term rates although now looking high compared to the floating rate are in fact about average based on historical data but for many, should they increase by another 1 to 1.5% over the next 2 to 3 years  it may have a detrimental effect on people’s ability  to comfortably service sizable mortgages so where to from here.

The general consensus is that the easing cycle is over and the Reserved Bank will start hiking rates as early as March 2010 whilst ASB economist Jane Turner expects by June 2010. Either way it is allot earlier than previously thought and as I have already warned, when borrowers start moving from floating to fixed, interest rates will start to increase.

Is an upward movement expected in the statements accompanying the upcoming October and December OCR announcements, I won’t think so but in saying that, the RBNZ can be quick to change its policy stance.

Due to the uncertainty we will now be inserting a short interest rate update in the weekly market Blog we send out to our database so if you haven’t already signed up do so.

Standing in the middle of the road is very dangerous and could result in being knocked down by traffic from both sides, which has lead to comments such as, [ it may pay to flick the coin and make a run for it, as what is the alternative ].

The alternative [ and a much better one ] is to ask questions. OK so what questions should I ask?

No, it’s not you that should be asking the questions, it should be your advisor asking you the questions. For example if you ring a bank and ask what the interest rates are they will tell you, you can read that in the paper. Ask them what they think rates will do, it is likely their answer will be of no help.

Regardless of who you phone, if you ask them, [ what can you do for us ] and they start straight in by quoting their best rate followed by bla bla bla, quickly end the conversation.

After chatting to someone on the internet last week I closed with this comment [ under 7% for two years looks reasonably attractive ] but remember, I was talking with her not you.

Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent.  You can read more of his views and opinions on his website

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