OCR hits Wairarapa homeowners

On April 24 the Reserve Bank raised the official cash rate (OCR) to 3 per cent in a move designed to cool the heated housing market and control inflation.

Wairarapa homeowners are being warned to brace for further interest rate hikes and prepare for bigger monthly repayments on their mortgages.

On April 24 the Reserve Bank raised the official cash rate (OCR) to 3 per cent in a move designed to cool the heated housing market and control inflation. It prompted economists to warn home owners to prepare for further home loan interest rate hikes, after a previous quarter-point jump in March.

The latest rise comes amid new Roost home-loan affordability figures showing Wellington region housing affordability improved last month.

Wairarapa-specific figures were unavailable. The report measured the percentage of after-tax pay needed to service an 80 per cent mortgage on a median-priced house.

Affordability improved from 55.3 per cent in February this year to 53.7 per cent in March, compared with 53 per cent a year ago. Wellington region's average weekly after-tax pay for first-home buyers was $885.74 - up from $883.75 in March last year.

According to latest Real Estate Institute of New Zealand figures, the median house price in the Wellington region dropped $18,625 to $400,000 in the month to March.

Nationally, housing affordability worsened at the fastest rate in more than 12 years. Kiwi homeowners now need nearly two-thirds of a median income to pay the mortgage on a $440,000 median-priced house - at 63.3 per cent up from 58.8 per cent last month.

Wairarapa Home Loans consultant Matthew Spicer said the interest rate hike was disappointing, but expected.

"Any increase is going to have some sort of impact. Fortunately the two that we've had have only been a quarter of a per cent at a time."

In the last three weeks banks had become more flexible on lending for low-deposit loans, and for his company the "proof in the pudding" was getting more of those loans approved.

On Thursday ANZ raised its floating home loan rate to 6.24 per cent, and based on that a home owner paying off a $200,000 mortgage over 30 years could expect to pay an extra $32 a month - the cost of takeaways or a packet of cigarettes, Mr Spicer said. Political reaction to the Reserve Bank announcement was swift, with both Labour and the Greens protesting the flow-on effect to home owners and buyers.

Labour's finance spokesman David Parker said New Zealand's interest rates were now among the world's highest, and the OCR rise was "another blow for middle New Zealand".

"It will add an extra $70 a month to a $500,000 mortgage or $50 a month to a $300,000 one, on top of last month's increase.

"With the Reserve Bank tipping interest rates to go to 8 per cent, this is going to cause real pain for home owners and will make the dream of home ownership unattainable for many more Kiwis."

Green Party co-leader Metiria Turei said the rise was a consequence of the Government's failure to get a grip on electricity prices and the property market, particularly in Auckland.

A drive towards mortgage rates over 8 per cent would "really hurt already stressed home owners and families struggling to keep their heads above water".