Homeowners have been spared the threat of mortgage rates above 8 per cent, as the Reserve Bank continues to hold back on interest rate hikes. The central bank kept the official cash rate (OCR) on hold at 3.5 per cent, as was widely expected.

Earlier in the year, a projected series of increases were expected to take floating mortgage rates past 8 per cent by the end of 2015. However, some economists are now not expecting another increase until March 2016.

The OCR, which has risen a full percentage point this year, has a close relationship with floating mortgage rates. However, Reserve Bank statistics show most Kiwi borrowers have made the switch to fixed home loans, typically for terms of two years or less.

Fixed terms are more closely tied to longer-term wholesale swap rates which are fixed contracts between lenders which are used to hedge mortgages.

Source: Stuff.co.nz