Homeowners are bracing for another rise in mortgage interest
rates but experts say most are prepared with better spending
habits and contingency plans.
And while average floating mortgage rates are predicted to
rise by 2 percentage points in the next two years to around
7.75 per cent, those with savings tucked away will begin to
see more of a return on their investment.
The Reserve Bank yesterday lifted the official cash rate 25
basis points for the second time in as many months, to 3 per
ANZ Bank has already announced it will lift its variable
mortgage rate to 6.24 per cent from May 12. Managing director
of retail and business banking Fred Ohlsson said many of its
savings accounts would also attract higher interest rates.
On a $100,000 mortgage the increase amounts to an extra $4.80
a week and $19.20 a month. For a $500,000 mortgage, the
increase is $24 a week and $96 a month.
ANZ said anyone with a home loan should ensure their budget
can comfortably manage interest rate increases.
In 2008 the bank began a financial wellbeing programme to
help struggling homeowners and loan repayment holidays were
available on a case-by-case basis.
None of the other major banks have moved to increase mortgage
rates yet but Kiwibank passed the increase on to savings
accounts with term deposits of $10,000 or more.
ASB chief economist Nick Tuffley said New Zealanders had
learned important lessons since 2008 about not
"We are behaving quite differently in terms of our borrowing
and spending and saving habits now compared to before the
global financial crisis," he said.
"We're more careful about our borrowing. We're tending to
save a bit more and our spending is more in line with our
income growth, so that's quite a contrast to the past couple
He said interest rates would continue to creep up,
particularly the floating rate and short-term fixed rates.
Mr Tuffley said many retirees who relied on interest from
savings to cover living expenses had suffered most in the
past five years. Interest on savings ranged from 1 per cent
to as high as 5 per cent depending on the bank, the term and
"They are certainly going to be people who will benefit as
interest rates rise over the next 18 months."
Kiwibank communications manager Bruce Thompson said increased
term deposit rates would be a "huge relief" for people who
used it as additional income and had been "stuck on very low
rates for a very long time".
Mike Pero Mortgages and Real Estate founder Mike Pero said a
home loan should not exceed 40 per cent of the owner's net
income. He said anyone with short-term debt should try to
Six tips for beating interest rate rises
1. Look closely at your budget now and make cutbacks where
2. Pay off short-term debt.
3. Build up a contingency fund.
4. If you know you are going to miss a payment, speak to the
5. Be aware that a revolving credit facility on a fixed-rate
mortgage will attract floating interest rates.
6. Take a mortgage holiday but know that interest will still