Among the many questions you’ll face when taking out a home loan in New Zealand, one of the most important is: Should you fix or float?
A fixed home loan allows you to lock in your mortgage at a given rate for a certain amount of time (typically between six months and five years). The number of people taking out fixed mortgages has shot up considerably in recent years, largely thanks to the
continued fall of the Official Cash Rate (OCR). Indeed, as the New Zealand Listener reported, recent figures show that more than 3 in 4 (76.5 per cent) mortgages are now fixed. In comparison, just three years ago floating home loans commanded 70 per cent of the market.
So, why exactly are so many people opting for fixed rate home loans?
1. Certainty
Because fixed rate home loans are locked into a certain rate, you know exactly what your repayments will be until the end of your agreement. This means no nasty surprises and no sudden payment hikes, making it substantially easier for you to set and stick to a budget.
2. Immunity to OCR changes
Fixed rate home loans are much more impervious to changes in the financial market than floating mortgages. For example, if the OCR rises, you can rest easy knowing that your repayments will remain exactly the same. Of course, this is a double-edged sword, but if you’re able to time it right it’s possible that a fixed home loan could help you save big in the long run.
3. Special deals
The fixed mortgage market is a highly competitive one, and banks often roll out special offers to entice customers. Be sure to regularly
compare New Zealand home loan rates to snag a good deal when one pops up!
If you are not sure about whats right for you or you want help with getting the best deal for the banks, talk to one of our
trusted advisers, they are always happy to help. Oh, and their service is free!