Mortgage borrowers warned interest rate hikes likely in next couple of years

PHOTO: ASB economist Chris Tennent-Brown says mortgage borrowers should be prepared for interest rates to rise over the next couple of years. Photo credit: Getty Images

Mortgage borrowers should be prepared for interest rates to go slightly higher over the next couple of years, a bank economist says.

Interest rates are already at record lows and economists don’t expect interest rates to drop further. In ASB’s February quarterly economic forecast, the bank forecast interest rates to start rising in August 2022.

ASB economist Chris Tennent-Brown confirms following the Government housing announcement, wholesale interest rates dropped. There are plenty of moving parts, but as the economy improves and recovery remains on-track, borrowers should brace themselves for higher rates.

“Even with these housing changes, we think people should factor in slightly higher interest rates than what they pay today,” Tennent-Brown says.

“Rates are low, they could move around a bit but in the long-term, as the emergency interest rate settings become less important, it’s right to expect the Reserve Bank will remove those settings,” he adds.