Is now the right time to refix your mortgage ?
Homeowners and prospective buyers will welcome the Reserve Bank of New Zealand ’ s recent decision to reduce the Official Cash Rate ( OCR ) by 0.50 percentage points , which will flow through to lower mortgage rates for those who have a floating rate .
The rate cut also raises the question of whether people should now fix their mortgages , and , if so , for how long ?
Commenting before the Reserve Bank ( RBNZ ) decision , independent economist Tony Alexander noted that , historically , it was unusual for New Zealand to have a threeyear fixed rate lower than 4.99 per cent .
With that in mind , he advised borrowers to think carefully before holding out for rates to drop significantly further .
Mr Alexander also discussed whether borrowers who locked in a five-year fixed rate of 2.99 per cent in 2020 or 2021 should consider breaking their loan and refixing .
He noted : “ If I break , will the bank pay me out the 2.0 per cent difference for the remainder of my five years ? Probably not . Do I think there is a strong risk of fixed mortgage rates jumping a lot higher in the next 14 months ? No . So , if I were in such a position , I would run the 2.99 per cent out to its maturity and continue congratulating myself on being clever for fixing back then rather than taking the candy of the 2.29 per cent for one year .”
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