Retail banks have recently started lowering their
fixed-term mortgage lending rates as competition for customers
BNZ chief economist Tony Alexander each week provides his
recommendation of what he would do with a mortgage, if he had
''In case you had not noticed, there is a sniff of a fixed
rate discounting war in the air.''
''I'd be keeping an eye out for a nice, low long-term fixed
rate and locking half of my mortgage into it while placing
the other half in a mixture of floating and fixed rates out
to two years.''
Mr Alexander would not be doing that with the goal of
minimising his interest rate cost because doing that required
faith in interest rate forecasts, which had been wrong for
about five years.
''Instead, I'd look at it from a near pure-risk management
perspective of giving myself time to adjust should interest
rates surprise on the upside.''
Wholesale interest rates had fallen slightly in the past
week, largely in response to falls in fixed interest rates
offshore because of worries about the political situation in
Europe, he said.
The falls might not last given the increasing frequency of
positive data releases in the United States and New Zealand
domestic data showing growth accelerating.
However, for now, with drought deepening in the North Island
and the currency already high, there was little chance of the
Reserve Bank tightening monetary policy. Mr Alexander was
picking it would be 2014 before the central bank lifted its
2.5% official cash rate.