Further mortgage rises 'could be on way'

Homeowners could be facing further rises in mortgage interest rates as world credit markets remain under intense stress.

Fixed two-year rates, which are now about 9.7 per cent, could be pushed over 10 per cent.

BNZ chief economist Tony Alexander said banks would become more cautious in lending to "debt-hungry Kiwis", Christchurch newspaper The Press reported today.

New Zealand banks sought about a third of their funding from overseas.

The credit crunch could spur another round of increases in fixed-interest rates, Mr Alexander said.

"Given where the cost of funds is going ... we could easily see higher fixed mortgage rates in the next few weeks."

Westpac economist Donna Purdue said the cost of borrowing had risen dramatically and it was going to get tougher.

Construction, manufacturing and small businesses were most at risk.

- NZPA