Don’t jump off the ladder despite rising interest rates

First home buyers facing increased mortgage rates at the same time inflation is taking its toll are concerned they won’t be able to keep their homes, but experts are warning Kiwis not to panic.

The Reserve Bank data shows the average one-year mortgage rate was at 5.56 percent in June 2022, something many first homebuyers who bought at the top of the market aren’t used to.

But with warnings of the rate to increase, an expert has said the interest rates are not the root cause of Kiwis’ finical problems.

While nobody likes to pay higher prices and seeing more money slip out of your account each fortnight is not a great feeling, in the grand scheme of things the steady climb in interest rates is not much higher than pre-pandemic levels.

According to data from the Reserve Bank, interest rates have recovered from plummeting down to about 3 percent in 2021.

Infometrics principal economist Brad Olsen told Newshub that while mortgage rates have come back down in the past couple of weeks, the long-term trend at the moment is for interest rates to continue to shift upwards.

“Yesterday’s labour market’s numbers, particularly the wage growth figures, do suggest the Reserve Bank is going to have to continue to increase the Official Cash Rate which will increase mortgage rates as well,” Olsen said.

“[There’s] no real hope in sight on the horizon interest rates will get considerably cheaper for first home buyers anytime soon, unfortunately.”

The gloomy outlook has many stressed, with a New Zealand Reddit forum filled with Kiwis saying they are concerned about meeting their mortgage payments.

“Rising interest rates, rising rates, rising insurance, rising everything. We get paid OK but it feels like such an uphill battle to get anywhere,” one wrote.

“It feels like we worked so hard to get here but we have to work even harder to stay here, and selling our house might result in negative equity so we’re so torn over what to do.”

However, one expert said mortgage rates aren’t the culprit behind Kiwis feeling the pinch.

Tony Mounce Mortgages managing director Tony Mounce said other factors are behind the pressures first-home buyers are feeling.

“Interest rates are still beautiful, 5 percent is still a thing of beauty,” Mounce said.

Mounce said there is probably another trigger for homeowners feeling the pinch including the combination of the high cost of living and inflation.

Annual inflation increased to 7.3 percent in the June 2022 quarter, the largest jump in over three decades.