{"id":413716,"date":"2026-05-06T00:47:08","date_gmt":"2026-05-06T00:47:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/413716\/"},"modified":"2026-05-06T00:47:08","modified_gmt":"2026-05-06T00:47:08","slug":"rising-mortgage-rates-could-reduce-house-prices-further-rbnz","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/413716\/","title":{"rendered":"Rising mortgage rates could reduce house prices further – RBNZ"},"content":{"rendered":"

House prices remain around the top of the Reserve Bank\u2019s estimated sustainable range, and while this suggests the risk of a correction is not particularly elevated, rising mortgage rates could reduce house prices further, the Reserve Bank (RBNZ) says in its latest six-monthly Financial Stability Report<\/a>.<\/p>\n

Released on Tuesday, the report said the housing market generally remains soft with national house prices below their November 2021 peak, having been broadly flat over the past three years.<\/p>\n

\u201cElevated housing inventories are weighing on house prices, particularly in Auckland and Wellington.\u201d<\/p>\n

This reflects the soft labour market and low net migration, and is offsetting stronger house price growth in parts of the South Island, the report said.<\/p>\n

House prices remain around the top of the RBNZ\u2019s estimated sustainable range, the report said.<\/p>\n

\u201cWhile this suggests the risk of a correction is not particularly elevated, rising mortgage rates could reduce house prices further.\u201d<\/p>\n

Lower interest rates easing debt-servicing pressures<\/p>\n

Growth in mortgage lending has also been subdued, the report said, with mortgage refinancing between banks elevated for a short period late last year.<\/p>\n

\u201cThis coincided with mortgage rates being near their lowest point, and a larger-than-normal share of mortgages rolling off fixed-rate terms.”<\/p>\n

\u201cDuring this period banks offered new customers up to 1.5% off their mortgage balance as an upfront payment to attract new mortgage business, compared with typical levels of around 0.9%. As a result, nearly three times the usual amount of mortgage debt switched banks in December, while market shares remained largely unchanged afterwards.\u201d<\/p>\n

This benefited a small share of borrowers at the expense of banks but the report said it may be offset by generally higher lending margins.<\/p>\n

\u201cAssuming no offset from higher margins, we estimate the higher cashback offer cost banks around $100 million, which is a small share of their annual profits before tax of around $10 billion.\u201d<\/p>\n

The report said lower interest rates were easing debt-servicing pressures, particularly for households with mortgages and for the commercial property sector.<\/p>\n

Risk to financial stability remain higher than in recent years<\/p>\n

Global uncertainty and subdued domestic growth have led to risks to financial stability remaining higher than in recent years.<\/p>\n

RBNZ Governor Anna Breman said the global risk environment has worsened over the past six months as conflict in the Middle East threatened world energy supply.<\/p>\n

Domestically, New Zealand has seen the immediate impacts of the conflict in the Middle East through rising fuel costs for households and businesses,\u201d Breman said.<\/p>\n

\u201cHigh diesel prices are having the most impact on the transport and logistic sectors, as well as primary industries including forestry and fishing,\u201d Breman said.<\/p>\n

\u201cWhile economic growth had been recovering prior to the conflict, we are now likely to see a somewhat slower recovery, affecting job growth and debt servicing.\u201d<\/p>\n

The report said ongoing volatility increases the risk of sharp corrections in global asset prices and tighter global funding conditions.<\/p>\n

\u201cNew Zealand is affected by shocks of this nature through several key channels including trade, uncertainty and financial markets.\u201d<\/p>\n

Oil<\/p>\n

The report said higher oil prices increase production and transport costs and add to global inflationary pressures.<\/p>\n

\u201cAn increase in inflation expectations could result in interest rates remaining higher globally for longer. This could lead to tighter financial conditions and weaker economic growth.\u201d<\/p>\n

\u201cSofter growth among New Zealand\u2019s trading partners would reduce demand for exports. These effects could be compounded by direct impacts on the approximately 3% of New Zealand\u2019s exports destined for the Middle East,\u201d the report said.<\/p>\n

Banks can withstand significant economic shocks<\/p>\n

With strong capital and funding buffers, banks are well placed to support customers who may be struggling, the report said.<\/p>\n

Banks could also manage stresses in offshore funding markets.<\/p>\n

Stress test results showed banks could withstand significant economic shocks including geopolitical events like the conflict in the Middle East.<\/p>\n

The report said direct impacts of the Middle East conflict were limited on insurers.<\/p>\n

Farmers well placed to manage current shock because of strong export prices<\/p>\n

The report said elevated commodity prices have supported incomes across the rural sector.<\/p>\n

\u201cThe milk payout for the current season is expected to be around $9.70 per kilogram of milk solids (kgMS). With breakeven costs averaging around $8.50 per kgMS, dairy farmers are generally profitable.\u201d<\/p>\n

With Fonterra completing the sale of its consumer brands to Lactalis, returning $3.2 billion to shareholders, the report said this was a significant cash injection for most dairy farmers.\u00a0<\/p>\n

\u201cWe anticipate farmers will use a portion of the money to repay debt. This debt repayment would strengthen their balance sheets further, with debt levels having already reduced over the past decade.”<\/p>\n

But increased fertiliser and fuel costs due to the conflict in the Middle East could reduce farm profits.<\/p>\n

\u201cFor 2026 autumn, budgets are unlikely to be affected given the price was already locked in. The biggest impact could be in spring later this year.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"House prices remain around the top of the Reserve Bank\u2019s estimated sustainable range, and while this suggests the…\n","protected":false},"author":2,"featured_media":413717,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-413716","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/413716","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=413716"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/413716\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/413717"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=413716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=413716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=413716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}