Interest Rates Overview 12/07/2012

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If I Were A Borrower What Would I Do?

Tony Alexander, Chief Economist at BNZ, his thoughts are:

I would fix for three years because I am cautious and would like something to be certain in these increasingly uncertain times. However, I also think floating is just fine given that the chances of the Reserve Bank tightening monetary policy in the next two years are not particulary large.

So if you choose to stay floating I think you will enjoy low rates for quite a long time. But remember that you get no rate certainty, and if your strategy is to float then one day fix you run the risk of things suddenly brightening offshore and those fixed rates bumping up before you can lock one in. And for the record, the experience of the past three years proves that none of us can pick when fixed rates will undergo their structural shift highter.

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