By Susan Edmunds of RNZ Home loan interest rates have been the big story of recent years. They have risen from historic lows of about 2 per cent to more than 8 per cent in some cases, and put pressure on many household budgets in the process. The Reserve Bank made it clear this week that it doesn’t expect the official cash rate to fall any time soon, which is expected to put a floor under any further retail interest rate drops.
So what should you do if you’re taking out a new loan or re-fixing an existing one? Glen McLeod, Edge Mortgages Glen McLeod said, up until this week’s announcement from the Reserve Bank, he was wavering between six month and 12-month fixes. “My preference is now firmly in the 12-month rate. With the hawkish rhetoric from the Reserve Bank, for me the six-month rate is now off the table.
” He said 12-month fixes would be at a rate of between 6.85 per cent and 6.99 per cent when discounted.
“While it is more expensive than the 18 to 24-month lending, it does bring greater flexibility. Taking the longer-term interest rates may result in your rates being higher for longer than they need to be.” Jeremy Andrews, Key Mortgages Jeremy Andrews said he would probably “hedge his bets” with an 18-month fix.
“We’ve been seeing the most common choices as six, 12 and 18 months fixed lately.” Some people were pushing out to a 36-month fix, which was about 20 basis points cheaper than a one-year option, he said. “It’s always best to get some m.