Source: MPA Mag —
A number of property investors are choosing to suffer the short-term pain of fixing their mortgage rates for a year in anticipation of interest rates easing, according to a new survey.
The latest Crockers-Tony Alexander Investor Insight found that of the 274 residential property investors polled, 62% preferred to lock in a one-year fixed term over longer options.
Tony Alexander said the result reflected expectations that monetary policy would loosen over the next year and continued the fall in the average fixing term preferred by borrowers, RNZ reported.
“I think there’s a growing realisation that with the economy potentially going into recession, inflationary pressures definitely will eventually fall away and that means the Reserve Bank will be cutting interest rates, probably strongly, through 2024-2025,” Alexander said.
“So, an increasing proportion of borrowers will be looking to take advantage of the falls in rates, when they eventually come along and, of course, the only way to do that is either float or fix for one, maybe towards the two-year area.”
The Reserve Bank will meet next month for another cash rate review after it delivered a jumbo-sized interest rate hike of 75 basis points in November in an effort to curb inflation.
Inflation remained steady at 7.2% for the three months ended December, which has some analysts predicting a softer rate hike of 50bp or 25bp, while others have stood firm on expecting another 75bp bump.
Fixing mortgages for a year could be a gamble, Alexander said, but so could fixing for a longer term.
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