Should you fix and if so for how long?

The thing about interest rates is that there is no right or wrong answer. What we know is that interest rates have remained historically low for some considerable time, often against prediction.

What we don’t know is how long that might continue.

Fixed interest rates fluctuate for a variety of reasons. Sometimes it reflects the market but almost just as often it reflects a Lender trying to find a competitive edge in the market. Shorter term rates particularly can be used for what I call “window dressing”. That is they are used to attract attention.

Consumers too are often fooled by cheap rates thinking that a lower rate means “best deal”  It is difficult to define best but generally speaking best incorporates a number of factors, not just the interest rate.

Banks presently are advocating to fix short on the basis that rates may continue to remain stable for a while yet and by fixing short you get a second crack at the whip so to speak. That’s all very well but what about the stability selecting a longer term fixed interest rate provides? 

 

Here is my take on what you should do.

Deciding how long to fix an interest rate for, or whether to fix at all, should be driven by intent, and very simply, the better we understand client circumstance and preferences the better the outcome is likely to be. SO, rule number one. Use an Adviser who can work with you to better understand those things and can present options to you, therefore helping you to make a better informed choice.

Are you working to a strict budget or do you need the stability of a steady repayment amount. If so you will logically look to fix long.

If it’s just about the cost, or circumstance is likely to change then logically you fix short or take a mix of short and long.

Or, maybe you just float.

 

Don’t settle for second best. At Pivotal we take the time to work with you and to understand the things you think are important. Just as importantly we will be there next time to help you with your important decisions. It’s called building relationships.

pivotalfin.co.nz