Of Interest

In the BNZ Weekly Overview the BNZ economist says banks are having more difficulty borrowing funds in the European market with the cost of doing so increasing which is likely to manifest itself in New Zealand.
BNZ remains of the opinion that unless sharemarkets collapse another 20% in the next fortnight the Reserve Bank will raise the official cash rate (OCR) 0.25% on June 10 and indicate plans to raise the rate steadily from then on.
“But with an eye to changing the pace if conditions turn out to be weaker or stronger than they expect,” he says.
The advice for borrowers is to

still toss a coin between staying floating and opportunistically hopping into a one to three year fixed rate.
Alexander says at the margin the risk remains that the Reserve Bank does not take the official cash rate in a straight line manner to the 6% level it has pencilled in for early 2012 and that suggests those choosing to stay floating won’t necessarily be worse off than fixing out to then.
“Note as ever however that no-one can avoid higher funding costs if they face a fixing decision now because of the risk floating rates are near their peaks in three years time,” he says.

Our advice at this stage is to hedge your bets and split your loan. If you would like some of advice or have a question please just ask Suzanne Isherwood on 0800 226 226!