This is the inference from comments from the Reserve Bank (RBNZ) that 70% of all mortgages will come up for renewal in the coming year.
And the RBNZ says this will be among the “headwinds” facing the economy.
The comments came at a media conference after the Monetary Policy Committee of the Reserve Bank (RBNZ) raised the Official Cash Rate (OCR) by 25bps to 0.75%.
Some retail interest rates rose in response and others had risen in anticipation of this move by the RBNZ.
Other rises are still to come. Many of these will affect people with fixed mortgages for say six months or one or two years. When these types of loan expire, they are usually rolled over and re-set at the rate that applies at that time.
With interest rates going up, these people will be in for rude shock, and comments from the deputy governor of the Bank, Geoff Bascand, suggest there will be quite a few of them.
“We've got about 70% of mortgages that we expect to re-price over the coming year, effectively facing some of those higher mortgage rates.
“This is really a question of uncertainty., we are not sitting here alarmed about it, we are just conscious that the (increase) will bite into free cash flow, into people's surplus and into the extent to which they hold back a little bit on spending.”
Bascand went on to suggest this was one of the headwinds facing the economy and the bank would observe and watch this.
Earlier, the Governor Adrian Orr explained why the bank went for a 25 basis point rise in place of the 50 point jump that some people had forecast.
“We did consider a range of options …. 50 was amongst it, what you see is our best foot forward.
“Slow steady changes in the Official Cash Rate give us more optionality to observe how the economy is behaving and balancing the risks that are in front of us.
“We have upside risks given inflation pressures, given capacity constraints, and on the other side we have continued health risks globally and here domestically.
“We are very aware that monetary conditions across the board have tightened.
“Likewise, we have to be careful, there is a considerable amount of debt and interest rate sensitivity and so we are in a good space to observe and take our time at this point.”
