Interest Rates - Where to next?

[beacon]

Interesting question. LT rates sitting over 8% in NZ is a scam, given global scenario. I expect rates to stagnate at these levels, though short term who knows...

[Dr_Who]

The banks are screwing us as much as they can, cos they can.

The NZ economy is completely in the mercy of the banks and global institutions. Our dollar is too high, retail rates are too high, compliance cost too high... NZ economy is stuffed!

[foxysfolkfaced23]

ASB put rates up on Friday. ANZ/National followed suit on Saturday. Westpac has just moved overnight. Kiwibank/BNZ still holding firm.

I fixed with Kiwibank yesterday - half for two years at 6.09%, half for 4 years at 7.40%.

My personal thought is that banks are basically making the floating/short term rates look too attractive for most people to turn down BUT they (the banks) know that they will be able to get them at 8.0%+ when they come off in 1-2 years time.

There is another reason/excuse that the banks push up interest rates and that is the cost of funding to the banks......which is the reason given for the latest round of rate hikes in Aussie - and hence the reason here too.

Interest rates have been dramatically lowered to spur growth & avert a major recession - it won't be long before the rates are put back to normal levels.

We rely on Australian banks for funding - where their house prices have not yet retreated and are still rising (big time bubble) - at least in NZ they came back 10%+ and have been pretty stagnant for 12-18 months - when Aussie rates rise/fall Kiwi rates are not far behind - so what happens in Aussie is important to us.

http://business.smh.com.au/business/...0810-effh.html

However it all depends on your situation of course - since i am just starting my mortgage i am happy with my strategy. Others who have only a few years to go will feel floating/short term is the best especially if they really nail the principal at low rates.

[Ptolemy]

My opinion is that rising i-rate will be a short-term phenominen that will catch out the fearful who will fix higher than they need ... long run there'll be little significant changes and possibly even a return to lower/lowish rates (below the long run norm) as the NZ economy recovers very slowly.

Interesting theory. Would appear to be in disagreement with most economic commentators who suggest that the massive worldwide borrowing programmes by governments (including NZ) will place upward pressure on investor funds and therefore interest rates. A glance at T-bill rates in the USA shows increases of 1% plus for 10 and 15 year bonds despite no change to official fed rates.

In NZ we have massive structural imbalances where our current account deficit is bloated by massive outflows to fund our debt based obsession with housing. Fitch have hinted at a credit rating downgrade. Any further shocks in the global financial markets may mean they carry through on the threat. Regardless of whether they do or don't bank funding costs are rising for 2 year plus rates.

[Dr_Who]

We spend too much and dont save enough, hence we rely on offshore capital for funding. It is as simple as that.

Like a weakling in the playground, we are picked on by the bigger boys.

[The Great Gold Guru]

TSB's 5.99% 2Yr rate looks the value option to me in the market if you aren't comfortable sitting on a 6m roll-over strategy at 5.45-5.50%. I have $1.3m borrowings over 8 rentals , current weighted average duration is only 1.4Yrs and weighted average rate is 6.24% ( made higher by 1 mortgage being at 8.50% with 9mths and 1 at 7.75% with 15mths to run ) ... would like to get duration up to 2Yrs+ but I think to do that would be too expensive. I'd need to pay some 4Yr and 5Yr and I just don't think there is value in that at present. Better to stick 6m,1Yr and 2Yr all below 6% and roll-over at best rate when fixes come to an end. Certainly absolutely no interest in 5Yr money at 8.30% ... that IS EXPENSIVE !!

[beacon]

Your tenants holding their chin up GGG? Would be interested to hear what your experience is. I hear only moans around, and growing ...

[neopoleII]

floating rates are going down..........
why on earth would people want to fix into higher rates?????

oh yeah......... the percieved new property boom...... lol

[foxysfolkfaced23]

maybe the banks want you to float or fix for less than a year.

but don't listen to me I only got a C in ECON101 - after my 2nd attempt (missed the exam first year)

having said that yes the rates curve is so steep that there really is no point fixing now for anything over 2 years unless you believe that rates are going to jump significantly

[peat]

there are good reasons to fix (tho you've missed the boat to some extent by now)
I value knowing that my mortgage is (largely) fixed for 5 years as it allows certainty in budgeting and planning. Less importantly it costs less too as there is a admin fee each time you roll over.
But I also knew when I fixed it at 6.5 in April that this was historically a very low number. last time (in 2003) when I fixed at a similar level I never regretted it
Its seems to me that in NZ with our high interest rate premiums due to being a small indebted nation they will never go particularly low esp when you know the bank wants 3.5 and the country's premium is what ? 2 at least... so there is no chance in hell of them ever going below 5 , so to lock in for 5 at years at 6.5 seemed a sure thing as it gives me certaintly with no huge premium for that. dont think I would be fixing for 5 right now tho.