Will you lose your home if mortgage rates rise?

The Kiwi property market has a lot of parallels with our neighbours across the ditch, which has made the results of a recent study all the more worrying. The research found that a substantial number of Australian households would experience financial difficulty if mortgage rates were to rise even slightly.

A quick look at the data

The study, which was carried out by Digital Finance Analytics (DFA), analysed the financial headroom of 26,000 Australian households, and concluded that 1 in 5 (20 percent) Australian households would experience financial difficulty if mortgage rates were to rise just 0.5 percent.

“This is important because we now expect mortgage rates to rise over the next few months, as higher funding costs and competitive dynamics come into pay, and as regulators bear down on lending standards,” (DFA) wrote, as quoted by the NZ Herald.

The DFA’s findings hit close to home, given that similar factors are tipped to shape New Zealand’s property market in the months and years to come.

Fixed interest rates on the rise

In fact, we’ve already seen a number of mortgage providers raising their fixed home loan interest rates this year.

As the NZ Herald reported, SBS bank, the Co-operative Bank and Kiwibank have all increased interest rates on their fixed mortgage products twice this year, while ASB is expected to roll out similar hikes later this week. Over the past year, the average interest rate for a two-year fixed-rate home loan increased 13 basis points from 4.74 to 4.87 percent.

Using a New Zealand mortgage rate calculator will help you find the best deal in the here and now – but rates change. As such, it’s critical that you have a reasonable amount of ongoing financial surplus when purchasing a home so you can roll with the punches when the economy shifts.