KEY POINTS:
A rise in US interest rates could affect kiwis who have banked on fixed interest rates coming down.
ANZ Bank chief economist Cameron Bagrie said home owners rolling off their fixed interest levels have in the past looked to long-term rates to cushion rises in interest rates.
He said the average lending rate of homeowners coming off their fixed term in the next 12 months is about 7.8 per cent.
But now all fixed lending rates have moved up to around the 9 per cent mark and that's a big jump, Mr Bagrie said.
"Now their cash flow will change because there's no part of the curve to run to," Mr Bagrie said.
He said for the first time the data is working in the Reserve Bank's favour.
It's the old story of when the US sneezes, the rest of the world catches a cold, Mr Bagrie said.
"If the US is in trouble, we'll see the interest rates fall," Mr Bagrie said.
The Reserve Bank is not commenting on the issue but in its June 2007 monetary policy statement it forecast that a slow-down in the US market would affect New Zealand.
"Recent developments suggest the effective mortgage rate will rise further, and remain higher for longer than projected at the time of the March statement," the June monetary policy statement said.
According to Reserve Bank figures, $23.6 billion was tied up in long-term home loans, including 3-4, 4-5, and 5+ year terms in June.
New Zealanders have $94.4 billion - over four times more money - tied up in loans of less than three years, including less than one year, 1-2 years and 2-3 year terms.
- NZHERALD STAFF
