A leading economist is warning the worst could be yet to come for many homeowners who are about to refix their mortgage rate.
In March last year, the average 5-year mortgage rate being taken out by borrowers was 3.78 percent - which has risen to 5.47 percent as of February 2022.
The median house price in Auckland was down 3.3 percent in April, reflecting rising interest rates, new figures from Barfoot & Thompson show.
CoreLogic chief property economist Kelvin Davidson told AM on Monday rising mortgage rates have a "lagged effect" as some homeowners are still yet to refix.
"I think it's fairly clear out there, we are seeing prices fall now and a lot of that is to do with rising mortgage rates," Davidson told AM Early host Bernadine Oliver-Kerby.
"The thing about rising mortgage rates is they do have a lagged effect. We know there are about half of loans still fixed in New Zealand and yet to refinance in this cycle."
Davidson warned we haven't seen the "worst of it yet."
"Yes, there will be people who have already rolled over and have faced up to those higher rates, but for a lot of people it's still yet to come," he said.
"It's a lagged effect, so we probably haven't even seen the worst of it yet."
When homeowners do refix at the higher rates, it will be another cost they have to face in the middle of a cost of living crisis.
New Zealand's annual inflation rate recorded to the end of March came in at 6.9 percent, the highest in more than 30 years.
The Reserve Bank of New Zealand also lifted the official cash rate (OCR) by 50 basis points in April, the largest increase since May 2000. That followed successive lifts over the last six months, taking the OCR to 1.5 percent.
Davidson told AM people need to be aware of what they can and can't afford when they refix at the higher rates.
"You only really know your optimal strategy in hindsight, which is a bit unfortunate," he said.
"Looking at the roll-over rate, people [who] were fixed a year ago at 2 or 2.5 percent, [are] now looking at five percent or even more so those rates have doubled, it's a big chunk of money for people.
"I guess it's about awareness and thinking about the best strategy, but you are going to be looking at a higher mortgage rate, no doubt about that."
Watch the full interview with Kelvin Davidson above.
