Homeowners lock in rates before rise

Ian McDowell

Rotorua home buyers are trying to lock in fixed interest rates before a forecast rise today makes mortgage repayments more expensive, a local real estate agent says.

Ian McDowell, of McDowell Real Estate in Rotorua, said the forecasted rise in interest rates could slow the Rotorua market, but the effects remained to be seen, he said.

"I believe it's had a positive effect up until now because people know the rates are going to go up so they've made the decision [to] upgrade ... and then lock an interest rate in for three to five years."

The Reserve Bank this morning said it had raised its official cash rate by 25 basis points to 2.75 per cent - a move that was in line with market expectations.

Meanwhile, new monthly figures from the Real Estate Institute of New Zealand show the median house sale price for Rotorua jumped 25.3 per cent during February to $288,250 - up 6.4 per cent from the same month last year.

The number of sales jumped 29.6 per cent to 70 last month - but recorded an 11.4 per cent year-on-year fall.

Last month, 6125 dwellings sold nationwide, down 7.6 per cent on last February.

National median prices rose $33,000 to $415,000 compared to last February and were up $13,000 or 3.2 per cent on January this year.

Reinz chief executive Helen O'Sullivan said it was hard to predict what impact rising interest rates would have on provincial regions, as there was no "rough rule of thumb".

However rising rates combined with the Reserve Bank's recent restrictions on low deposit home loan lending could put a "significant handbrake" on sales as vendors put off selling until they could get a good price, she said.

Rotorua Daily Post Facebook page readers commented yesterday they were getting ready for the interest rates rise.

One person said "Fixed ours to have peace of mind" while another said "I have mine fixed until May and it costs too much to alter at this stage.".

Another didn't believe the rates would rise.

"They have said this several times over the last year or so then everyone goes out and fixes their mortgages ... floating is best!"