Interest rates seem to keep popping up in the news. How do they impact mortgages and what does this mean for you?
For the majority of home-buyers, paying the full value of your property is out of reach. This is where a mortgage comes into play, which is an agreement between you and a lender (typically a bank) which uses the property as collateral if you end up being unable to pay for it.
In order to make money, lenders apply interest rates, which determine how much it costs to borrow money, to mortgages which can be in the form of a fixed-rate or a floating rate. Let’s take a look at the difference between the two and when the best time to choose one or the other is:
Opting into a fixed home loan rate has options ranging from six months to five years. This guarantees the interest rate on your mortgage for that period, regardless of the interest rate in the market. This is a good option if interest rates have been steady and you suspect they will be rising in the foreseeable future as you will be protected from the increased cost of borrowing.
With a floating rate, the market interest rate applies to your mortgage, so this is subject to regular changes. This is a good option if interest rates are high and expected to fall as you will not be locked into a certain rate that might end up meaning your borrowed money costs more.
Here at Williams Corporation we work closely with some great mortgage brokers who can offer you reliable, expert advice on which mortgage option will work best for your financial situation. If you would like some help from our team, click the button below.
Listed below are the current mortgage rates for New Zealand’s most popular lenders.