Further interest rate rises have struck homeowners a blow in the wallet, adding more to their mortgage bills.
The Reserve Bank governor, Graeme Wheeler, raised the official cash rate from 3 per cent to 3.25 per cent yesterday - the third straight rise of 25 percentage points this year.
The latest increase adds about $15 a month to repayments on every $100,000 of mortgage debt, for a 20-year loan.
Many homeowners have already responded to projected rate rises earlier this year by switching all or part of their mortgages to a fixed rate.
These may initially higher be than a floating rate but, crucially, stay the same regardless of OCR rises for as long as the fixed-rate term lasts.
Reserve Bank figures published yesterday said that, since the start of the year, lending on floating rates had fallen by about $10 billion, and fixed-rate mortgages had risen almost as much.
Wellington Home Loan Shop broker Sloan McPhee said the past three to four days had seen an influx of people looking to fix their rates.
"It's been really noticeable over the last three days, or probably over the last three weeks. People are a lot more aware these days around interest rates and finances."
But he cautioned against fixing all of a mortgage. It was better to retain flexibility by keeping a small portion floating to pay it off faster.
ANZ became the first bank to say it would follow the Reserve Bank's lead, with rates across its range of mortgages to rise 0.25 per cent.
Its floating variable rate rose to 6.49 per cent.
While interest rate rises hurt borrowers, they help people with money in the bank.
ANZ has also lifted the interest rate on its high-interest savings account from 4.25 per cent to 4.50 per cent. Other banks are expected to follow suit.
The interest rate rises are another annoyance for people trying to get on the housing ladder, but experts said they would not be the deciding factor in the current market.
Real Estate Institute Wellington regional director Euon Murrell said the rises would not stop people borrowing to buy houses.
What was hurting the market was loan-to-value restrictions brought in by Wheeler in October to cool the housing market.
Murrell said it was targeted at a problem that was nowhere near as bad in Wellington as in Auckland and Christchurch.
"Yes, [interest rate rises] will have a small impact on mortgage repayments, both existing and new, but more to the point it is the loan-to-value restrictions that are having the most impact, especially with first-home buyers, and I am tired of the Reserve Bank's view on this.
"The pressure on the market is being driven by Auckland and the artificial Christchurch situation, created by the earthquakes . . .
"They must realise that the rest of the country is not experiencing this type of market so why penalise the provinces? New Zealand does not stop at the Bombay Hills."
- The Dominion Post
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