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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

February's Property Gazette

Published by Scott Miller on Thursday, January 28, 2016 in

Interest rate outlook for 2016

We are hearing murmurings that the Official Cash Rate (OCR) is set to drop again during the second half of 2016, possibly taking it to a new low of 2%. This will put pressure on banks to reduce floating and short-term fixed mortgage rates. With this in mind we want to make sure you are in a position to take advantage of these reductions.

Although the one to two-year fixed rates are the cheapest rates at most main banks right now, around 1% below the floating rate, they may be a little too long to take advantage of the forecasted reductions in the OCR. So borrowers can create some certainty, and obtain a lower rate by fixing for short terms rather than floating. If the RBNZ cuts rates further this year, there is some scope for floating and some short-term rates to be lower later this year. However, if the RBNZ does not cut interest rates further short term rates may rise from these levels.

When choosing a mortgage, it’s not just about finding the cheapest rate. To ensure you are getting the best out of your mortgage it is wise to have a mixture of all the options available from NZ lenders. One characteristic of a floating mortgage is borrowers can enjoy a certain amount of flexibility with the loans repayments, allowing for a minimum monthly repayment or a larger repayment if you are having a goods month. Splitting the mortgage into different terms, or a mix of fixed and floating mortgages, are strategies that allow some flexibility while locking in some interest rate certainty.

With the downward trend of interest rates we are getting a lot of enquiries about breaking loans. Many customers believe they can save money by breaking their existing loans, unfortunately in our experience this is seldom the case. We urge you, your friends and family to contact us first before looking to break any of your existing home loans, so we can negotiate with the lenders before making a decision.

For more information, contact us today.

 


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