Low fixed rates may rise after Fed hike

by Maya Breen18 Dec 2015
In light of the US Federal Reserve hiking its cash rate from zero to 0.25% this week, Kiwi mortgage holders might see a rise in longer fixed term rates in the next few weeks, the NZ Herald reports. 

Loan Market mortgage adviser and Professional Advisers Association board member Geoff Peterson has seen 18 years in the industry and told NZ Adviser that it’s a definite possibility. 

“The long term rates are determined more-so by the off-shore markets than they are the on-shore markets, so it’s possible that could happen but there are no guarantees, that’s the thing,” says Peterson. 

Massey University banking expert David Tripe said fixed rates of one year or more would be impacted the most by the US debt market but the ultra-low rate of 3.99% from SBS bank may not last much longer, according to the NZ Herald. 

“Whether we’re going to get rates below four per cent really depends on how the economy goes,” says Peterson. “I don’t think we’re going to see much change for the next three years to be honest - I think we’re still going to see rates pretty flat as they are now – they might just move slightly up, slightly down. There’s no reason for the OCR to be changing dramatically.”

On whether mortgage holders with high debt coming off a fixed rate should re-fix quickly, Peterson says it depends on the individual. 

“When you’re reassessing your fixed rates, you really need to look at your overall situation individually because it depends on what your plans are going forward.

“You don’t fix rate unless you actually know what you’re going to be doing in two to three years’ time,” says Peterson.

“You need to base those decisions around changes in lifestyle and upcoming expenses ie. having children, changing jobs or moving countries… that all has an impact on whether you flex or float and for how long – it’s an individual consideration.”

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