Have you got your interest rate strategy right over the past 1, 5 or 10 years or do you feel like you have been bowled out by picking it wrong? Everyone seems to have their way of doing it, some base it on the morning star signs others on complex excel spreadsheets which they have tracked for years.
The original post started with a very tedious explanation of short term interest rates being driven by the RBNZ and the domestic economy and fixed rates over 3 years being driven by the US economy and the global outlook. Having just condensed four paragraphs into one sentence I can now provide some practical hints for you.
New Zealand interest rates are at historic lows 4.15% 6 months to 4.85% for 5 years should be achievable if you borrow a decent amount. Negotiate with your lender or have someone like me do it for you. They are bending over themselves for those borrowing under 80% loan to value ratio and will assist with the costs to change over if your incumbent doesn’t come to the table.
Have a think about what you plan to do over the short to medium term, will you sell your house in the next year? Are you going to have to move to take on that new job? Are you expecting to start a family in the next 12 months? All are major factors in determining how long you should commit yourself to a fixed term and what you can afford. For example I have a friend who fixed for 5 years, sure enough within 18 months he was transferred to a new location where they don’t want to buy yet as they don’t know the area and are having to stump up a huge break cost.
If you are confident in your knowledge take a view, own your decision (you’ll feel better about it if you get it wrong) and if you aren’t sure consider the paragraph below or take the conservative side which is to stay floating or fixed short term until you can or want to make that decision.
If you don’t want to take a view diversify & blend your interest rates to create an average interest rate that you like that provides some certainty with some long term interest rates with cheaper short term interest rates to lower the average interest rate.
Hopefully these hints will help you hit if for six a little more often.
All information provided is for information purposes only and where the information comes under the auspices of the Financial Advisers Act 2008 it is considered to be class advice only. No information is to be taken as specific personal advice