The Official Cash Rate is expected to be lifted tomorrow morning, prompting media reports today urging borrowers to “get in quick” before bank rates went up as well.
The cash rate has not moved since 2011.
Many brokers have reported over recent weeks that they were seeing growing numbers of people wanting to fix their mortgages, often on two- or three-year terms.
About 60% of people are now on fixed rates. In 2007, when the Reserve Bank started to hike interest rates last time, only about 14% of lending was on floating rates.
PAA board member Karen Tatterson said borrowers needed to carefully consider what was best for them over the medium term.
"An increase in the OCR always creates a flurry of fixing amongst borrowers, but our recommendation is to remember that you have options and you need to ensure your mortgage will meet your needs in terms of income and plans over the medium term," she said.
"In an increasing interest rate environment, borrowers need adopt a different strategy. While it may have made sense to leave their lending on the floating rate in the past, this year they need to plan for the medium term but importantly, not make knee-jerk decisions."
She suggested people consider a property valuation if they had a taken out a loan with an LVR of more than 80%. Recent price increases could mean they now had more than 20% equity and would be in a better position to bargain with their banks.
All lending is individual to specific needs, but some general pointers Karen suggests borrowers on the floating rate could consider are:
"There are many options for borrowers and I strongly recommend – especially in an increasing rate environment – that they speak to an adviser to get the full picture and make the most informed decision about how their mortgage can best work for their needs."
