Mortgages - to fix for the short- medium- or long-term?

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alasta

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#2210914 4-Apr-2019 20:30

timmmay:

I also think based on the articles I've read that the world is heading for another slowdown, if not another recession. I've moved my kiwisaver to a conservative plan, and I'll keep it there for a couple of years. I suggest anyone in growth consider putting at least a portion into balanced or conservative. I have my family in conservative for now, to reassess in 2020 or 2021.

If you are a reasonably long way off retirement then you are better to just stay in a growth fund. Your fund manager will rebalance your portfolio appropriately based on prevailing economic conditions and your investment horizon. For longer investment horizons it can be a good opportunity to pick up undervalued assets during a recession so that you can benefit from significant capital growth during the next economic cycle.

tdgeek

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#2210915 4-Apr-2019 20:31

cddt: Both ASB and BNZ have just dropped their 3 year rates to 3.95%. That's a good option.

Similar. 5 year's for not much more, don't worry about world events, and world events are WAY up there. I'd go 5 years if it was me

jonathan18

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#2210916 4-Apr-2019 20:32

Just to provide a bit more context - no, the particular loan in question is relatively small; it's under $70k. TBH, we may be at the point where it would be paid off at the new repayment amount and at the lower interest rate (than currently) within five years, so I'm not sure they'll even give me that term.

One year doesn't work for us as we're comfortable with our method of spreading term dates so that they are spaced; also, given our total mortgage is now under $150k I'm not sure if there's going to be much value in shifting banks (who probably aren't interested in our business due to the low amount so won't be offering us great deals!) so am not sure if we need to be syncing the various loans.

That said, we still have a desire at some point in the mid-term to move to a more expensive area, so even if we can fix for five years it may be more sensible to go with the two years, given it seems unlikely rates will be going up significantly in that period, and we may have a better idea as to whether we'll be buying elsewhere or not.

Thanks for all the advice; I'll read through it all again properly prior to making a final call!

timmmay

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#2210937 4-Apr-2019 20:53

alasta:

timmmay:

I also think based on the articles I've read that the world is heading for another slowdown, if not another recession. I've moved my kiwisaver to a conservative plan, and I'll keep it there for a couple of years. I suggest anyone in growth consider putting at least a portion into balanced or conservative. I have my family in conservative for now, to reassess in 2020 or 2021.

If you are a reasonably long way off retirement then you are better to just stay in a growth fund. Your fund manager will rebalance your portfolio appropriately based on prevailing economic conditions and your investment horizon. For longer investment horizons it can be a good opportunity to pick up undervalued assets during a recession so that you can benefit from significant capital growth during the next economic cycle.

Yes, long term you will be fine staying in growth. I find my fund manager (Fisher Funds) doesn't rebalance, so by moving to a conservative fund for 1-2 years while it's getting better returns than growth (which I expect to go negative) then shifting to growth at the right time I'll probably end up better off. Of course I could get it wrong and do worse, but I'm doing ok so far.

nzkc

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#2210949 4-Apr-2019 21:11

jonathan18:

Just to provide a bit more context - no, the particular loan in question is relatively small; it's under $70k.

<snip>

That said, we still have a desire at some point in the mid-term to move to a more expensive area, so even if we can fix for five years it may be more sensible to go with the two years, given it seems unlikely rates will be going up significantly in that period, and we may have a better idea as to whether we'll be buying elsewhere or not.

Right... 70k over 5 years. Here's your repayments (monthly) range from lowest to highest:

3.95% = $1,288

4.89% = $1,318

Does $30/mth make that much difference to you? Over 10yrs the difference goes up to..wait for it....$31 a month.

If you're happy with the higher rate - lock it in for 5 years. You're not going to save much money either way you go! For me it's not even worth the discussion.

Batman

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#2210951 4-Apr-2019 21:14

always choose the lowest, this has been true for a decade. one day interest rates will rise but not in the foreseeable future

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#2212390 7-Apr-2019 18:51

What's everyone's thoughts on the Reserve Bank changing the capital requirements for the banks

This will put pressure on interest rates.

driller2000

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#2212395 7-Apr-2019 19:10

nickb800:

I wouldn't overthink it. The banks have produced their rate cards with better financial nous than we will ever have. They expect to make a profit no matter what term you choose - the range of interest rates over different terms reflects their expectation of likely movements

Agreed.

You are already splitting to spread risk.

You have a RC facility to maximise the ability to pay down that portion.

Most commentators advise short term - which seems fair ie. 2 - 3 years max. (It's what we will do with our 2nd fixed piece which comes up in Oct this year.).

The MOST important thing is smash your mortgage as quickly as possible - and DON'T add any more debt - cars/boats/holidays etc.

alasta

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#2212401 7-Apr-2019 19:23

logo: What's everyone's thoughts on the Reserve Bank changing the capital requirements for the banks

This will put pressure on interest rates.

There appear to be wildly varying estimates of just how much impact it will have on retail interest rates. Up until recently it had been suggested that the Reserve Bank would delay OCR increases to compensate for the retail banks' higher margins retailing to the new capital requirements, but I don't know how well that theory stands up now that the Reserve Bank is hinting at bringing the OCR down to 1.25% by the end of the year.

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