Coin toss on rates: Alexander

Deciding between floating and fixed mortgage rates currently may be a case of tossing a coin in some instances, according to BNZ chief economist Tony Alexander.

In this week’s BNZ Weekly Overview Alexander says it is forecasting that the Official Cash Rate will increase from 2.5% now to 5.75% late in 2011 and onto potentially to 6.25% by late 2012.

As a result, these rises imply that floating rates will increase from 5.85% to 9% and then 9.5%.

“If you think we are right then you toss a coin between floating and fixing. If you think we are over-estimating the rise in interest rates then you float,” he says.