Mortgages

Housing feels the first bite of interest rate rises

Higher interest rates have barely begun to bite on household spending but their impact is already being felt in the housing market, says ASB Bank.

Monday, August 09th 2004

Reserve Bank Governor Alan Bollard has raised interest rates four times this year and signalled more hikes to come. But with only a third of home loans at variable interest rates, the impact lags the rate rises, says ASB chief economist Anthony Byett in his quarterly report on the housing market, released today.

While the official cash rate was raised three-quarters of a percentage point during the first half of the year, the average increase in the home loan rate paid over the same period was only one-fifth of a percentage point, according to the Reserve Bank.

"Rate hikes to come, plus the lagged effects of higher interest rates when people come off their previous fixed rate, will see the interest rate effect bite harder in the current six months," Byett said.

"By the end of the year the extra interest cost will amount to around 1 per cent per annum, or around $900 million."

He said: "Interest rates may still be moderate by historical standards but higher house prices mean the debt servicing to income ratio for a current purchase is now approaching the peak of the previous housing cycle."

Read More - Opens in a new window

Most Read

SBS FirstHome Combo 4.29
Co-operative Bank - First Home Special 4.85
China Construction Bank 4.85
ICBC 4.85
Kiwibank Special 4.89
ASB Bank 4.89
SBS Bank Special 4.89
TSB Special 4.89
Westpac Special 4.89
Kainga Ora 4.89
AIA - Go Home Loans 4.89
Nelson Building Society 4.93
ICBC 4.95
SBS Bank Special 4.95
China Construction Bank 4.95
Wairarapa Building Society 4.95
TSB Special 4.95
ANZ Special 4.95
ASB Bank 4.95
Kainga Ora 4.95
Westpac Special 4.95
AIA - Go Home Loans 4.95
SBS Bank Special 5.39
Westpac Special 5.39
ICBC 5.39
Co-operative Bank - Owner Occ 5.59
BNZ - Std 5.59
BNZ - Classic 5.59
AIA - Go Home Loans 5.59
ASB Bank 5.59
Kainga Ora 5.69
Kiwibank Special 5.79
ANZ 5.79
SBS Construction lending for FHB 3.94
AIA - Back My Build 4.44
CFML 321 Loans 4.99
Co-operative Bank - Owner Occ 5.95
Co-operative Bank - Standard 5.95
Heartland Bank - Online 5.99
Pepper Money Prime 6.29
Kiwibank - Offset 6.35
Kiwibank 6.35
TSB Special 6.39
Kainga Ora 6.44

More Stories

Four decades of 6-7% yearly house price growth ending

Friday, March 21st 2025

Four decades of 6-7% yearly house price growth ending

New Zealander’s reliance on property capital gains in the mid-single digits is at an end.

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

Friday, January 31st 2025

[TMM Podcast] Yelsa serves up “marine reserve” of property buyers

It’s been years in the making and former real estate agent Mike Harvey is now coming to market with his platform matching buyers and sellers, an offering he says will be a gamechanger for the industry.

Leaving last year's stumbling housing market behind

Friday, January 17th 2025

Leaving last year's stumbling housing market behind

As interest rates ease and job losses climb, New Zealand’s housing market faces a mixed year of modest growth, with conflicting forces shaping the outlook for homebuyers and investors.

Don’t bet on house prices rising faster than incomes

Wednesday, January 15th 2025

Don’t bet on house prices rising faster than incomes

Former Reserve Bank Governor and National Party leader Don Brash says there are grounds for believing that house prices may finally have ended the three-decade period when they rose significantly faster than incomes.