Latest rate rise puts squeeze on

Tauranga's Charlie Rahiri, 35, said yesterday's interest rate rise was manageable but made saving difficult. Photo / George Novak

The fourth rise in the official cash rate this year will add about $50 a month to the average person's mortgage repayments but Tauranga home owners are taking it in their stride.

The Reserve Bank increased the official cash rate by 0.25 per cent yesterday and banks looked to be set to follow suit.

Mark Lister of Craig's Investment Partners said a person with a $300,000 mortgage on a floating interest rate would see their repayments go up about $10 to $11 a week. "I think most people have probably fixed their mortgage interest rates by now. None of this is any surprise. I think today's move by the Reserve Bank is probably the last one we'll see until next year," he said. "It's not huge in the scheme of things but I guess if you look at where the market rates were at the start of the year it's probably more significant. You're probably getting close to $180 to $200 a month."

Despite the regular increases, interest rates were still low compared to past levels, Mr Lister said. "The reason they are going up is because the economy is going well, unemployment is going down. The price we pay for things improving is that interest rates have to come back to more normal levels."

Tauranga man Charlie Rahiri, 35, said the increase would not change they way his family spent money but it made saving difficult. "Every little bit means you have to pay more. It counts at the end of the week. We'd like to try and save but the reality of that's just getting further and further away," he said. "It's just something you've got to be wary of and just keep an eye on. If that goes up everything else goes up as well."

Bethlehem resident Lance Graham, 44, said the rise would not affect him now but would be felt in two years time when his fixed term interest rate came to an end. "It will be a big change. We realise we've got to be ready for it." Budget Advisory Service manager Diane Bruin said the rise was a concern because it put more pressure on people with mortgages. "It's using up available funds that they need for other things," she said. Frank McLean, mortgage adviser at Mortgage Express, said people should look at fixing their interest rate but had some time as it was unlikely to go up again this year. Chris Rapson of Rapson Loans and Finance said the four increases would add up during the year and be difficult to manage with little or no wage growth.