Brian Berry - Financial Advisor
	Straight forward, quality financial advice - so you can get on with the fun stuff in life. Click to view Rothbury's website.

As with many things, getting the timing right is often crucial - ask an elite athlete who has been disqualified from a major event because he has false-started. Believe it or not, it's no different for interest rates and this applies on two levels.

Firstly, at the higher level, look at the Reserve Bank - they are trying to determine the right moment to start the increasing interest rate cycle by increasing the OCR (Official Cash Rate). They need to get their timing to coincide with when the economic recovery is well bedded in and therefore inflationary pressures need winding back, but without throwing the economy into another recession - all the time, bearing in mind what is happening overseas. To get their timing right will be no mean feat!

Secondly, at the lower/borrower level, to get our timing right, we need to try to anticipate when the Reserve Bank will start its increasing cycle and make our fixing decisions before that happens - phew! Why in advance? Well, once the financial market starts feeling that the increasing cycle will start at the next OCR review date, the shorter term fixed rates will start to move, with the variable rate (being more determined by actual movements in the OCR) being the last rate to move.

At this stage it looks like the two most likely start dates for increasing the OCR are June 10 or July 29, and personally, I favour the July date as the earliest start date as I think that the Reserve Bank will want to see more rather than less economic data to confirm a strong recovery and therefore the June 10 review date is too early for that.

In the interim, my suggestion is to sit on a variable rate in the short term and to keep an eye on the economic news. The better and more consistent that becomes, the sooner the increasing cycle will start. Once a start looks likely, then fixing should be considered and the two year rate still appeals.