NEW HOUSING CRISIS: Homeowners brace for rise in mortgage rates

Homeowners are bracing for another rise in mortgage interest rates with an expected lift in the official cash rate (OCR) on Wednesday.

The Reserve Bank is poised to lift the OCR another 50 basis points to 3 percent to try and curb inflation, which could cost the average household an extra $60 per week.

Mortgage interest rates have been rising fast over the past year, taking one-year home loan rates from about 2 percent to 5.

On Tuesday, they’ll likely go even higher.

“It’s pretty certain we’re going to see the official cash rate go up by half a percent. So it’ll take it to 3 percent,” CoreLogic chief economist Kelvin Davidson said.

“The question really is, is what happens after.”

For first home buyers who bought last year when property prices were at their peak, they could find themselves with mortgages larger than what their homes are now worth.

“Not good for the mindset. However, it doesn’t really mean too much until you actually have to sell,” Davidson said.

The pressure on household budgets from the rising rates is intense.

“So if they’ve got a $600,000 mortgage and it is floating then it might be $60 a week difference,” Velocity Financial director Brendon Ojala said.

And $60 a week can mean a big squeeze on already tight spending.

“We’re just on floating so we don’t want to keep going up too much,” one Kiwi said.

“It seemed inevitable but it’s still hard to cope with,” another said.

GOT A STORY FOR US?

Rising interest rates is putting the dream of homeownership further out of the reach for some first-home buyers.