19-12-2008

Mortgage borrowing strategy

1. News
2. 2008
3. December

Mortgage rates have fallen considerably in the past month,

particularly the floating rate and the shorter-term fixed rates.

Interest rates are likely to continue to fall as the Reserve Bank

(RBNZ) cuts the Official Cash Rate (OCR) a few more times in 2009.

We recommend fixing for six months or one year. At some stage in

the near future it will be worth extending your fixed rate, but for

now, long-term rates are too high, and have yet to fall to attractive

levels.

Our view

It’s clear from our economic view that the RBNZ still hasn’t finished cutting

the OCR, and we expect to see at least another 1.5 percent of cuts over the

next quarter. Of course, we aren’t alone in thinking this – the market shares

a similar, albeit slightly less aggressive view. As such, the expectation of

more rate cuts is already built in to longer-term interest rates, which is one

reason why the 1 year rate is lower than the floating rate.

To read more of the December ANZ Property Focus, go to http://anz.co.nz/about/media/newslibrary.asp?Property_Focus