Fixed Term Loan: Please don't do this

If you're coming to the end of your fixed term loan, you're likely to receive a letter or email from your bank. It may contain a temptingly low interest rate. The suggestion from the bank is to act now and lock it in.

Don’t do this.

Here’s why. The bank can only put this offer to you when you have less than eight weeks left on your loan term. However, the Reserve Bank’s Official Cash Rate (OCR) is announced every six weeks. So there’s every chance rates will drop further before your loan rolls over.

In theory, of course, there’s a risk that rates could go up. However, the Reserve Bank has made it clear that New Zealand is in a low interest rate environment for now. In fact, the Governor of the Reserve Bank has asked lenders to prepare their computer systems for the possibility of negative interest rates. Truly, we live in strange times!

So what do you do when it’s time for your loan to roll over?

Call us.

During the first lockdown we moved to a new and vastly superior CRM/loan application system. Our old one didn't hold adequate information regarding loan terms, so we need you to tell us when your lender is asking you to re-fix. Just get in touch when you receive that bank letter - you could even just email a copy of the letter - and we’ll help you get the best possible rate.

I realise you may be one of those well organised people who likes to act swiftly when it’s time to re-fix. But you will lose nothing by getting our advice (which may be to wait a few weeks and see if there’s an even lower rate in the pipeline).

And remember, we don’t charge for this service. We just want to make sure you don’t end up paying too much for your fixed-rate home loan, by jumping the gun too early.