Westpac's economists are saying to mortgage borrowers that now is the time to fix because wholesale interest rates have risen in recent weeks and the pressure is on for fixed mortgage rates to rise.
"We now favour fixing," Westpac's economists said in their weekly commentary titled 'Wobbly Knees' issued on Monday. Westpac Chief Economist Dominick Stephens gives more background for the bank's economic view in the video above.
"Our view has long been that fixed rates are attractive relative to where we think floating rates are heading over the next few years; the question has been one of timing the move into fixed," they said.
"Recent developments locally and offshore have reduced the chance that fixed mortgage rates will fall further from here, which reduces the ‘room for regret’ from fixing today," they said.
Westpac's comments follow rallies in stock markets and commodity prices late on Friday on enthusiasm about measures announced after a summit of European leaders.
"Indeed, given that wholesale interest rates have risen over the last few weeks, there may be more pressure on fixed-term mortgage rates to rise."
One year swap rates have risen from a low of 2.35% on June 6 to 2.69% last week. The two year swap rate has risen from 2.41% to 2.83%.
See our interactive chart on fixed rates below.
Westpac's Stephens released a report in March recommending borrowers fix. See our report here.
Then in late April Westpac changed its view back to seeing floating as a better option after dovish comments about future interest rates from the Reserve Bank. See our report here.
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