Mortgage Rate Update Feb 2011

Economists generally agree that mortgage rates will not begin to increase until the second half of this year.

The issue they have not addressed is the impact of a mad rush to fix. Just about everyone I talk to “intends” to fix once rates start to increase.

This creates a problem. Put simply, the market cannot cope with about $30 billion of home loans wanting fix all at the same time!

As a result I expect floating rates to gradually increase BUT fixed rates to increase rapidly.

With floating rates currently around 6.20% and the 2 year fixed rate around 6.50% my view is that the 2 year rate offers the best value-for-money.

You could fix half of your debts now, or you could wait a few months. But don’t wait too long or you may quickly miss the window of opportunity!

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