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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7 Comments
Here we go again, clear the tables and chairs we're going to have another song and dance.
I remember Dominique being the lead vocalist in a no-hit boy band back in March called The Economists.
They were a real flop - sung always out of key and the lyrics to their song 'GET SCARED' were so dark and depressing.
This is either a re-make or an attempted comeback - which ever way, we can choose to either switch on or switch off
Can't agree with Dominic at all. Heard him on NewstalkZB this morning where he said to Susan Wood that during the last property boom, rates were in double figures - that simply wasn't true and then said that in his opinion rates will rise - thank you Nostradamus, I predict that they will then drop again some day - what a waste of money this guy is to Westpac, I would rather bet on Winston Peters keeping his word than Dominic Stephens advice.
Fix or Float? Fix, ... Float ...Fix .... Float ....
I just can't decide!
The 5.2% @ 1 year is tempting .... but then I don't want to be locked in. What if rates do rise, then you're better on longer term fixed ...
The indecision leads to .... staying floating .... again ....
Looking at the charts it appears the swap rates are all still in a bear run / down trend.
I have negotiated a floating 5.1% with ASB, fairly comfy sitting there until the 5 year comes mid 5's or lower in the next wholesale rate pullback... or until another bank offers me a nice cash incentive to switch lendors!
That's funny ...
Speaking of the the tempter .....
Now temptation is an interesting thing ..... sometimes we are tempted to do something which seems right ... but ends badly. So fixing seems a good risk-minimising thing to do - but are we falling into temptation by risk-minimising but reducing options of escape? Or are we being tempted into floating & drifting into a dangerous position of vulnerability?
Fear & greed ..... fear of rising interest rates, greed of chasing low rates. Just like investment.
NZ Heads...nah, I don't think so...I don't know what it is, but if you take a good look, all the members of that band have got devilishly boyish looks. Though they genuinely don't sing very well and often croon songs you don't want to hear.... there is something about their industry that seems to keep signs of ageing at bay....but I really don't think it's the devil's work at play. Nothing like song and dance to keep you young...
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