Right borrowing strategy can ease burden for homeowners

Monday 13 September 2004

Floating mortgage rates could hit 9 per cent by the end of this year, but the right borrowing strategy can help ease the burden for homeowners.

By The Landlord

Homeowners could have saved a tidy packet if they had chosen a fixed-interest-rate mortgage strategy in the past five years, according to Bank of New Zealand chief economist Tony Alexander.

About two-thirds of all mortgages are on fixed rates and that is likely to increase during the next year as floating rates continue to climb, Mr Alexander says.

This week, the Reserve Bank increased official interest rates by a quarter of a percentage point to 6.25 per cent and the bank's governor, Alan Bollard, said a further rise was likely this year.

A borrower who took out a two-year fixed-term loan in January 1999 and renewed it every two years with a similar term would have saved between 0.1 per cent and 0.5 per cent against the average floating rate over the same period, Mr Alexander said.

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