KEY POINTS:
The number nine is spreading like a rash through the retail mortgage rates on offer, after the Reserve Bank's trio of rises in the official cash rate and a sharp increase in longer-term wholesale rates.
"The magnitude of increases in interest rates over the past three months is massive," ANZ National bank chief economist Cameron Bagrie said.
"A two-year fixed mortgage is now likely to be 100 basis points higher than in February, similarly for a five-year rate."
For a typical first-home buyer looking to borrow $250,000, the increase over the past three months increased the weekly interest cost by almost $40.
The speed of the change might pierce the "bulletproof" sentiment of the housing market, Bagrie said.
House price inflation continues to accelerate. Quotable Value reports house prices nationwide rose 11.1 per cent in the year ended May, up from 10.6 per cent in the year to April and 9.8 per cent in the year to March.
But Governor Alan Bollard has a new ally as he battles to turn that around: world interest rates.
United States 10-year bond yields have jumped around 40 basis points over the past two weeks, and the New Zealand 10-year yield has risen 50 basis points over the same period.
New Zealand's five-year swap rate, an indicator of the cost of funding fixed-rate mortgages of the same duration, has also climbed 50 basis points in two weeks, most of it in the past week.
"There is nowhere to run," Bagrie said.
Before the latest series of OCR increases five-year mortgage rates were about 50 basis points lower than two-year rates, reflecting an inverted yield curve. Borrowers often switched to long-term loans when their mortgage came up for renewal to minimise the impact on their cashflow.
ANZ expects the effective or average mortgage rate to continue rising to a peak of close to 8.4 per cent early next year.
