Average family's finances to be hit hard
By JAMES WEIR - The Dominion Post | Friday, 27 April 2007
The average Kiwi family will soon be handing close to 15 per cent of their take-home pay to the bank, a massive jump from the 9 per cent just a few years ago, and it will hurt, economists say.
The Reserve Bank raised official interest rates from 7.5 per cent to 7.75 per cent yesterday, with still a chance of another rate rise in June. Floating mortgage rates are expected to rise above 10 per cent soon.
Fixed-term rates may rise closer to 9 per cent, but only slightly, because the central bank's interest rate rise has already been factored in.
Economists say Reserve Bank governor Alan Bollard will eventually cool the housing market, as hundreds of millions of dollars more are sucked up by rising mortgage rates.
Real estate agents remain confident the market will keep rising because of a strong job market and migration.
National Bank economist Cameron Bagrie said the Reserve Bank would eventually win and slow down house price increases.
Homeowners coming off fixed mortgage rates of about 7.8 per cent set a couple of years ago, will face rates now of at least 8.6 per cent. With about $33 billion of fixed home loans due to roll over in the next 12 months, that will drain hundreds of millions of dollars out of household budgets.
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