KEY POINTS:
Reserve Bank governor Alan Bollard has followed the trend set in March, May and June and increased the Official Cash Rate by .25 per cent, to a whopping 8.25 per cent.
So what does this mean for lenders?
At present ANZ, BNZ, ASB and the National Bank are
offering 10.3 per cent floating rates for mortgages.
If the rate increase is passed on to customers by the same incremental amount, floating rates could go as high as 10.55 per cent.
A fortnightly mortgage payment over 30 years on $200,000 could increase from $830.60 to $847.83. That is an increase of $17.23 a fortnight.
But most New Zealanders - over 70 per cent - are on a fixed term.
There is over $115 billion nationally owed to banks on fixed terms, compared to over $18 billion on a floating rate, according to May 2007 figures from the Reserve Bank.
And that number is rising by nearly $2 billion a month.
Dr Bollard's OCR increases are having a gradual effect on fixed rates. The two year fixed rate charged by banks has shifted from 7.73 in May 2005 to 8.83 in May this year.
One piece of good news for Dr Bollard was an announcement earlier this month from the Real Estate Institute of New Zealand.
REINZ announced the median house price had dropped by at least $2500 between May and June.
That could suggest one of the inflationary drivers has started to put the breaks on but the other two that Dr Bollard mentioned in his June announcement - namely Government spending and dairy prices - have shown no signs of slowing down.
* nzherald.co.nz, in doing the calculations and forecasts in this article, acknowledges that an increase in the OCR does not correlate to an immediate adjustment in banks' floating interest rates.
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Why the Kiwi dollar looks sexy
Here are the current official cash rates of other developed countries:
Bank of Canada: 4.5 per cent
Bank of England: 5.75 per cent
Bank of Japan: 0.5 per cent
European Central Bank: 4 per cent
Federal Reserve: 5.25 per cent
Swiss National Bank: 2.5 per cent
Australia: 6.25 per cent
China: 6.84 per cent
New Zealand: 8.25 per cent
* Figures from fxstreet.com