The current 6.5 percent rate for two-year or more fixed mortgage rates is unlikely to climb significantly, CoreLogic says. Photo: 123RF
The property data firm CoreLogic believes mortgage interest rate rises may be slowing.
The Reserve Bank raised the Official Cash Rate by 50 basis points yesterday, to 4.75 percent, and said more rises would follow.
"Anything beyond two years [fixed term rate] has pretty much peaked" - Kelvin Davidson
CoreLogic chief property economist Kelvin Davidson said it was unlikely the current 6.5 percent rate for two-year or more fixed mortgage rates would climb significantly.
Kelvin Davidson Photo: SUPPLIED
"Anything beyond two years has pretty much peaked, there's still uncertainty but I'd say that's a fair enough assumption. There may be a little bit more upwards pressure at the shorter end on those floating rates and maybe the one year fixes."
Davidson said generally speaking, he believed rates were reaching their peaks, but they were still high.
Falling house prices were good news for those seeking to enter the market and for homeowners the drop in value was only on paper unless they actually wanted to sell, he said.
"Providing people keep their jobs and keep servicing the mortgage, there's nothing to panic about here but there are some risks to face up to at the same time."
Patterns remained unclear, and there could still be some upward pressure, particularly with floating rates or one-year fixed terms, he said.
There is currently low buying and selling activity evident for property investors, Davidson said.
The election in October may act as a trigger for investors to start buying again if people anticipate National winning and reversing tax changes, he said.
"But it's still pretty tough to make those sums work out - you're still looking at low rental yields and high interest rates, not to mention compliance costs and various other things, large deposits."
Credit conditions such as mortgage supply and mortgage costs were the key driver for the property sector, he said.
If migration continued to improve and the election changes the general mood things could look a little less pessimistic in the second half of the year, he said.
Cyclone will add to inflation increase in short-term - Tuffley
ASB chief economist Nick Tuffley said the effects of Cyclone Gabrielle would increase inflation in the short-term.
"Its (the Reserve Bank) job is to keep inflation low and stable and also support employment" - Nick Tuffley
The Reserve Bank would have looked at the destruction from the cyclone to inform its decision to hike interest rates by 50 basis points as expected, he said.
The bank knew there would be more resources and a huge amount of construction going into affected areas in the future, he said.
In the short-term, there was also a shortage of goods and these factors combined would push up inflation, he said.
"From the Reserve Bank's point of view when it's looking at its core job - inflation - it can see there's going to be at least as much inflation, if not more."
Interest rates were a very blunt tool and it was targeted support from the government that was really going to help those most affected by the cyclone, he said.
A lot of cash will need to be injected just to get the regions back to where they were before the event, he said.
"And that creates a flurry of spending and activity and those temporary shortages as everyone's trying to buy a fridge or a car at the same time."
The general pattern with disasters was an initial disruption, followed by increased activity as the rebuild began, he said.