Stay floating and wait for RBNZ decision
Economists recommend that borrowers stay floating in the run up to the Monetary Policy Statement (MPS) this Thursday as floating and fixed rates could fall if the Official Cash Rate (OCR) is cut.
Tuesday, March 8th 2011, 3:45PM
by Jenha White
Westpac Weekly Commentary says fixing before the Reserve Bank's decision is known is of little value, given the likely market response to various scenarios.
It says an OCR cut would probably generate a sharp fall in floating rates and a fall in fixed rates, while an on-hold decision could leave fixed rates unchanged.
"If the Reserve Bank does cut, there may be a window of opportunity to lock in favourable fixed rates, given that Christchurch reconstruction will eventually put upward pressure on the OCR," Westpac says.
BNZ Weekly Overview economist Tony Alexander also recommends borrowers stay floating and says those planning to fix should hold off.
"There is no benefit to fixing now apart from certainty and given the rally in wholesale borrowing costs, there is a good chance fixed rates will be cut again very soon following a round of cuts this week concentrated on the short terms."
Alexander says he could personally see himself continuing to float for a long time - probably into next year.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
| « Economists divided on OCR announcement | OCR cut by 50 basis points to 2.50% » |
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