Have your say: Marac says investors should lock in fixed rates

Have your say: Marac says investors should lock in fixed rates
Marac Finance Chief Financial Officer Alan Williams said that New Zealand investors should lock in longer-term fixed rates at the start of 2009 as interest rates are set to fall further over the year. The Official Cash Rate has fallen 325 basis points to 5% since July 2008, and is expected to fall to 4% or lower by mid 2009. The next OCR announcement is on January 29. Many finance companies covered by the government deposit guarantee scheme are still running relatively high term deposit rates. The scheme ends in October 2010, meaning any 12 month or 18 month deposits invested now will be covered. The scheme covers deposits up to NZ$1 million. FE Investments is currently advertising the highest 12 and 18 month rates for a company covered by the scheme, at 7.75% and 8.25% respectively. Marac is currently advertising 6.5% for 12 months and 5.5% for 18 months. To see current rates offered by New Zealand lending institutions, click here. For interest.co.nz's new deposit calculator, click here. Here is the full statement from Marac's Williams:
"Many New Zealand investors, and especially pensioners, rely on income from fixed interest investments. With fixed interest rates falling in New Zealand by approximately 30% during the past 12 months, and with another cut in the Official Cash Rate expected towards the end of January, many investors face uncertainty as to the return on investment they can expect." "In qualitative research we conducted in 2008, we found that many investors have a trusted group of friends, family members or colleagues that they feel are knowledgeable about financial matters. Although many investors take professional financial advice, it is likely that many investors have more time during the holiday period to sit down with their friends and family to discuss their investment strategy, financial priorities and talk about the year ahead." "As New Zealander's come back from holiday, we anticipate seeing an increase in investors considering and locking in longer term fixed interest investments. With interest rates likely to fall further, locking in longer fixed interest terms will enable investors relying on this type of investment to take advantage of the current higher long term rates before they potentially fall further." "With so much uncertainty remaining in the market, longer term fixed interest investments are providing a level of certainty around the level of return investors will receive and this is an attractive option for many investors."
What do you think? Should investors lock in fixed rates now or should they use current capital to pay off existing debt and wait for rates to rise before investing again? If investors pump cash into guaranteed finance companies offering higher rates than the banks, will this put pressure on the government to extend the deposit guarantee scheme? Comments below please.

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