Rising interest rates and cost of living pressures are also affecting house prices.
The Reserve Bank on Wednesday raised the OCR to two percent, up 50 basis points, in the face of 30-year-high inflation. That takes the cash rate to its highest point since mid-2016 and means a likely rise in mortgage rates.
National Party’s finance spokesperson Nicola Willis said the 50 basis point shift would mean “more pain on the horizon for anyone with a mortgage”.
“Rising interest rates will be difficult news for Kiwis already battling the cost of living crisis. This is the first time ever the Reserve Bank has increased the OCR by 50 basis points twice in a row, reflecting just how severe inflation has become,” she said.
“A family with a $700,000 mortgage is on the hook for $14,000 more a year in interest than this time last year. If, as KiwiBank expects, mortgage interest rates rise to at least six percent, a Kiwi family with a $700,000 mortgage will be paying at least $42,000 in interest a year – around $800 a week in interest alone.”
Tighter lending rules which made it harder for homebuyers to gain approval for mortgages from banks are playing a part in the downturn in prices.
Two of New Zealand’s major banks – ASB and Westpac – are predicting house prices to fall by about 20 percent over the next 12 months.
