Interest Rates on the Rise

For the last couple of weeks the major banks have been raising their longer term fixed interest rates. The five year fixed rate is now around 7.2 percent. This is a full one percent higher than its lows previously this year or approx $330 per month on a 400k mortgage more.

We are heading towards a difficult time for a lot of people who took out home and investment mortgages recently.

As a lot of people were able to get the loans they desired due to the historically low variable interest rates, the alternative to being exposed to high interest rates in the future-which are fixed rates, are heading up at a fast pace. They are creeping up toward the average rates for the last forty years. Then the question is – to fix or float?

With the economy still at a low point the variable rate could still be pulled lower by the reserve bank yet, which would tempt a lot of people to stay floating. History also shows after a lot of government spending/printing money follows inflation. And the hot word at the moment is hyperinflation!

Inflation usually increases interest rates, food prices, property prices and most importantly consumer confidence! Bad, bad and good and sometimes good!

So thinking whether to fix or float it’s a question of how much exposure to high rates one can afford. Or will the savings of lower variable rates now offset fixing and the higher rates to come? Every one is watching closely and with the banks raising the fixed rates it must serve as a pretty sure sign of things to come.

To talk to a specialist about your own rates contact us here .