Mortgages

Interest rate hikes to hit hard in a year's time

The real bite into homeowners’ pockets as a result of the Reserve Bank raising interest rates won’t hit until up to about 18 months, says ANZ Bank economist Cameron Bagrie.

Wednesday, September 22nd 2004

The reason for that is that about 70% of home lending is now done at fixed rates and that 80% of fixed-rate lending is for terms less than two years. Bagrie says current Reserve Bank data suggests the average interest rate on existing one to two-year fixed rate loans is only 6.9%.

That compares with the 8.5% to 8.6% floating rates currently charged by the five major home lending banks.

That means most borrowers haven’t experienced any increase in rates yet.

The Reserve Bank has raised its official cash rate (OCR) five times this year from 5% to 6.25% and economists are expecting a further increase at the next review in late October.

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