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Top brokers still see a prominent place for fixed-rate mortgages

Even as we continue to rush into floating rate mortgages, leading mortgage brokers still see a very prominent place for fixing.

Wednesday, September 14th 2011, 9:41AM 2 Comments

by Jenny Ruth

Paul Fuller, national Mortgage Broker of the Year 2011 winner and who is part of the Prosper Group, says the decision whether to fix or float ones mortgage isn't just a matter of looking at what's happening in financial markets.

"It's about understanding more about your clients, what their goals and aspirations are and what their stage in life is, how many kids to they have," Fuller says.

"Can they afford interest rates to rise? Are they down to one income?"

Fuller says rather than quoting percentages to his clients, he works it out in dollar terms. Such as, if a client decides to fix for two years, it will cost them X more dollars than the current floating rate or if they stay on floating rates and the Reserve Bank starts raising interest rates, it will add X dollars to their interest rate bill.

"It brings it back to reality. It's very hard to understand what 0.5% means," Fuller says.

For many of his clients, certainty about their mortgage payments is very important.

Somewhat more than 50% of the mortgages he's arranged recently have been at fixed rates but mostly for between one year and 18 months. "Very few people are interested in anything longer than the two-year rate," he says.

Bruce Patten at LoanMarket, who was the first runner-up for this year's award and last year's national winner, says it comes down to clients' individual circumstances for him too.

For example, he's just fixed a mortgage for five years for a couple who have three children under five, the husband working full time and the wife part time.

The couple had just come off a 7.65% fixed-rate so re-fixing for five years at 7.35% looked attractive and they know they can afford it until the wife can return to full time work, Patten says.

But with other clients who don't have any affordability issues, he's encouraging them to sit on floating while reducing the size of the mortgage by as much as they can afford.

Only about a third of his clients are currently on fixed-rate mortgages. "A lot of people are just taking the cheapest option which is to stay on floating," Patten says. "Most people at the moment are prepared to take the gamble."

John Bolton at Squirrel Financial Solutions, who was this year's second runner-up, says while most of his clients are taking shorter term options, particularly since he can sometimes get six-month fixed rates below floating rates.

"Often the rates are quite different from what's advertised. We're managing to get quite large floating rate discounts at the moment," Bolton says.

He estimates nearly half his clients are on fixed rates currently and often he'll recommend a split between floating and fixing. "A lot of our clients don't want the stress of having to worry about their rates every second day."

« Bollard likely to keep interest rates on hold this weekRBNZ leaves cash rate on hold »

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Comments from our readers

On 14 September 2011 at 12:09 pm John Dugdale said:
Good to see that mortgage brokers aren't playing on the gullibility of their clients.
On 15 September 2011 at 11:01 am Stu said:
Clearly being placed in the top broker awards has little to do with your knowledge of interest rate risk and hedging for client debt portfolios.
Commenting is closed

 

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 4.05 4.49
ANZ Special - 3.55 3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 ▼4.65 ▼4.80 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank ▼5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 ▼4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 ▲3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.19 4.35 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society ▼5.50 ▼3.95 ▼4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.97 4.05 4.39

Last updated: 24 January 2020 8:55am

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