According to the latest BNZ survey and the housing market data collected, the Reserve Bank might be forced into increasing interest rates much sooner than what was earlier expected. In light of the current economic crisis, people's ability to afford home loans is at an all time low. Rising house prices and interest rates have pushed home loan affordability at its worst since 2006.
Bernard Hickey, editor of Interest. co. nz fears that the situation will possibly have a significant impact on the Reserve Bank's official cash rate. He also feels that the RB will now have a major difficulty to live up to its commitment of keeping the OCR down as much, and as long as, possible.
As reported by the recent figures, house prices have risen considerably, with the median home rates rising to $350,000 in September as compared to $347,000 in August. In addition, the average 2 year fixed mortgage rate has surged 8 basis points from February's 5.92% to 6.58% in September.