A mortgage advisor says there will be no quick fix for people with mortgages suffering the burden of a high official cash rate (OCR).
As expected, the Reserve Bank (RBNZ) held the OCR steady at 5.5 percent on Wednesday, but the tone of its monetary policy statement was taken as hawkish by some economists.
The central bank's forecast track for the OCR was pushed out slightly, with suggestions it would need to remain around its current level well into next year in the face of core inflation pressures and economic uncertainty.
Loan Market advisor Aaron Cooke told Morning Report that would not be good news for those needing to re-fix their mortgages this year, with most two-year fixed mortgage terms currently sitting around the 7 percent mark.
"To put it into perspective, if you had a $685,000 mortgage back in 2021 and you had a fixed rate of 3 percent and you're coming off this year, at a 7 percent rate your payments are going from $2900 a month to $4500 a month - so a very painful change."
Cooke said while some five-year fixed mortgage rates were currently available at rates as low as 5.99 percent, people needed to be cautious about locking themselves into longer terms.
"If we look back to the lead-up to the GFC ... there were quite a few people who did lock in what they believed were cheaper rates at the time - for four or five years - and then when rates did decline, they were basically left there, sitting on those higher rates."
It could be difficult to break mortgage agreements and pick up a cheaper rate if interest rates did fall, he said.
"Effectively, you're then facing break fees and you're going to be up for a big cost and likely not going to win by doing that."
He said while it might be possible for some people to negotiate better mortgage deals with their lenders, banks were also facing a squeeze in the current economy.
"The reality is the banks are facing higher funding costs as well," he said.
"So there's some discounting but it's not massive."
'A bit of a warning shot'
Kiwibank's chief economist, Jarrod Kerr, told Morning Report the bank hoped the current two-year fixed mortgage rates of around 7 percent would prove to be the peak for mortgage holders.
"We certainly think so, but the risk is that the central bank comes in again - we hope that that does not happen; we hope that things do turn south in a way in which the next move we think is going to be a rate cut."
He said the data suggested the RBNZ had done enough to tackle inflation but its hawkish policy statement showed it still had some concerns.
"They're worried that inflation doesn't get back down to 2 percent fast enough, so they gave us a bit of a warning shot yesterday that if prices hold up for longer, they may have to hike one more time."
Kerr believed the country would see another contraction in activity in the second part of 2023 but said Kiwibank's forecasts had inflation returning to the target band of one to three percent "early next year".
"I think the Reserve Bank has done enough, what we're seeing in the data suggests that they are getting on top of the inflation beast and that things will play ball over the next year."
Kiwibank chief economist Jarrod Kerr Photo: Supplied / Gino Demeer
He agreed with the RBNZ's assessment that - unlike in the past - immigration did not appear to be an inflationary factor in the current economy.
"These migrants are coming here and they're picking up the jobs, they're filling the vacancies that've been vacant for a very long time," he said.
"What that's doing is putting bit of downward pressure on wages which is exactly what you want to see; that we're increasing the supply of workers at a time when demand has been quite high."
However domestically generated inflation remained a challenge, Kerr said.
"We're sort of rotating from spending a lot of money on goods to spending more money on services and there's still a lot of inflation coming out of construction and housing-related prices as well."
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