Fix or float?
Question from Edward updated on 12th March 2013:
We live in our own home and have a mortgage of $200,000. We also have two investment properties, both are 100% finance and are interest only repayments. We came off a fixed rate for all three properties. I would like to know do I fix now for all three properties or wait for awhile and enjoy the low floating rate. If I have to fix now, for how long?
Our expert Kris Pedersen responded:
It’s a hard question to answer without knowing more about you, your requirements now and requirements moving forward. Fixing gives you certainty for that period but continually over the last few years there have been times where economists and other experts have proclaimed the time to fix has arrived yet rates have stayed low and in many cases gone lower. I can’t really see them getting much lower at the moment and one advantage with fixing over floating unlike 12 months ago is that there are some good fixed rate options out there (especially in the two to three year range) where you can actually fix for cheaper than what you may be able to float for. Note, that if there is any chance you may want to sell you are probably best to continue floating so as to avoid break fees. Without knowing more about your situation another god option to consider at the moment is hedging your bets and looking to break your debt up over a couple of fixed terms while also retaining some on floating. Based off your information above if you do this the mortgage against your home is probably the part to keep floating so you can repay principal without penalty should you decide to do so.
Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz