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First-home buyers are expected to be further locked out of the property market by yesterday's new official cash rate high and experts believe the rise may do little to cool the red-hot housing market.
David Chaston, publisher of www.interest.co.nz, said Westpac was the first bank to raise interest rates on its variable floating and some of its fixed-rate offerings following the Reserve Bank announcement.
He expected other big banks to move on their floating rates during the next few days.
Reserve Bank Governor Alan Bollard cited inflationary pressure from the housing market, strong domestic demand and government spending in announcing the raise of 25 basis points to a new high of 7.75 per cent. Part of the motivation of the rise was to try to maintain pressure on the housing market.
But BNZ chief economist Tony Alexander believes the rate hike will have little impact on the rampant property market.
"[Prospective property buyers] have listened to people forecast falling house prices for the last three or four years and prices have kept on rising," he said.
Real Estate Institute national president Murray Cleland said the increase would hit the bottom end of market - and would-be first-home buyers - and leave the "financially sound" top end largely untouched.
ASB economist Daniel Wills predicted a gradual slowing in in house price rise but not a fall.
"Prices will very likely continue to go up, just at a much slower pace than we've seen over the last couple of years."
University of Auckland property department head Associate Professor Laurence Murphy said international trends showed rising interest rates reduced the demand for property and slowed house price rises.
But Professor Murphy said our buoyant economy and tight labour market meant demand might remain.
