Fixed-rate mort­gage tipped as way to go

South Waikato News - - PROPERTY -

Mort­gage hold­ers on float­ing in­ter­est rates are be­ing warned to con­sider be­low-av­er­age fixedterm in­ter­est rates be­fore both rates start to rise.

West­pac se­nior econ­o­mist Dominick Stephens urged peo­ple to keep a close eye on eco­nomic in­di­ca­tors over the next few months be­cause fixed rates could rise ear­lier and faster than float­ing rates if the econ­omy per­formed bet­ter than ex­pected this year.

‘‘Fixed-term rates rep­re­sent good value at the moment,’’ he said.

BNZ econ­o­mist Tony Alexan­der agreed with West­pac that peo­ple would be bet­ter off fix­ing for the next two or three years but he said the ques­tion was when to fix and that he did not be­lieve float­ing rates would move quickly.

‘‘Quickly to me sort of says, 1 per cent or 1.5 per cent over a pe­riod of a few months. What we’re think­ing is the mid­dle of the year is the most likely time those float­ing rates will start to rise.’’

He said the of­fi­cial cash rate, of 3 per cent, would likely rise to 5 per cent by the end of 2012.

‘‘So late 2012, I think most of the float­ing in­ter­est rates will be be­tween 8 and 8.5 per cent.’’

He ex­pects eco­nomic growth of above 3 per cent this year, with fall­ing un­em­ploy­ment, ris­ing wages and com­mod­ity prices. But he said those ad­van­tages would be off­set by ris­ing prices for food, fuel and raw ma­te­ri­als.

And the un­ex­pected must be ex­pected, Mr Alexan­der said.

He said cur­rency pres­sures were strong, Chi­nese in­fla­tion still threat­ened, the Euro­pean debt sit­u­a­tion was un­re­solved and the US econ­omy was far from played out.

‘‘It’s al­most guar­an­teed that all of our mon­e­tary pol­icy fore­casts will change as the year goes by be­cause that’s what hap­pened last year.’’

West­pac be­lieves the econ­omy will ex­ceed Re­serve Bank ex­pec­ta­tions of sub­dued growth for the next 12 months.

Mr Stephens said four fac­tors are were cru­cial: the hous­ing mar­ket; the eco­nomic im­pact of the Rugby World Cup; earth­quake re­con­struc­tion in Can­ter­bury; and ris­ing com­mod­ity prices for farm­ers.

Do­min­ion Post

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