Floating your home loan is the way to go.

Monday, May 3rd 2010, 2:34PM

The past 18-months has seen the official cash rate (OCR) drop 400 basis points and taken many home owners off fixed interest rates and on to floating as the above graphs shows the number of home loans on fixed rates has been in decline with the exact opposite effect on home loans on floating.

With the median floating rate for all registered banks sitting at 5.75%, it is currently well over 200 basis points lower than the median five-year fixed rate on offer and just under 200 basis points lower than the three-year term, which makes the floating rate the cheaper option at the moment.

How long this trend will last is anyones guess with the recent comments from the Reserve Bank Governor Alan Bollard suggesting they will begin removing policy stimulus over the coming months.

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