Fixed or Floating Home Loans?

It’s the age-old question, which is best: fixed or floating interest rate home loans? And right now, with the official cash rate (OCR) on hold, comes a great time to reconsider your home loan options.

But when it comes to home loans, one size does not fit all, and that means there is no simple answer to what loan type you should choose. Instead, you need to take into account the economic conditions in conjunction with your current financial situation and future goals.

The Reserve Bank of New Zealand (RBNZ) is currently keeping the official cash rate (OCR) on hold while focusing on economic recovery.

Changes to the OCR generally have a chain and effect reaction and flow through to the floating rate offered on home loans, but with the increases to the OCR on hold, there is the potential to make some ground on your debt while floating rates are still relatively low.

Meanwhile, fixed rate home loans, particularly over 2-year terms, have been falling recently, making these rates very attractive to borrowers in the here and now.

Which is Best Fixed v Floating:

When considering what type of loan is the right one for your finance need, interest rate alone should not be the deciding factor. Borrowers should consider the loan as a package and should consider the fees, charges and features offered and should decide based on these whether the loan will meet there current and future finance needs.

Things to consider:

  • What do you want/need from a home loan in the short/long term?
  • How flexible are different fixed and variable home loans?
  • What are the costs for different fixed rate and variable rate home loans? 
  • How do they compare over a certain period of time? 

Talk to your Loan Market mortgage broker to compare fixed and floating rate home loan options, or to review your current home loan, make an appointment today.


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