We asked how the OCR hikes will affect you

Tuesday, 29 November 2022

Reserve Bank Governor Adrian Orr discusses lifting the OCR by 75 basis points to 4.25%.

We asked readers to share how the official cash rate rise could affect them financially.

The Reserve Bank raised the official cash rate by 75 basis points to 4.25%. It has forecast the rate will peak at 5.5% next year, while also predicting a further rise in inflation and a year-long recession from mid-2023.

Jose MacDonald

I spend 45% of my wage on a mortgage.

I've grown all my own veges, cut my own wood, so I can cook and heat water all winter, as I don't use a heater as electricity is too expensive.

* Is it a good idea to buy a first home now? The experts are divided

* Interest rate crunch: Did the Reserve Bank drop the ball?

* The 'R' word: What is a recession and why should you care?**

I made $70,129 last year, so didn't get the $350 cost of living payment, which seemed like an election bribe.

With diesel and grocery prices so high, I only travel to work and back, and do shopping in between, so I don't make unnecessary trips.

I've hurt my back, but can't afford to take three weeks off to wait for a doctors appointment, plus I can't take time off to heal because 80% from ACC isn't enough.

My tribe got $27 million from the Government, so I asked what assistance they could give, but because I'm classed in the middle income bracket, they can't help with anything.

I'm still paying a truck payment, so can't afford to change to a cheaper hybrid vehicle.

I think it's going to get really hard next year, so I'm hoping the Government can stop sending so much money overseas, and look after the basics here first.

Zac Rush

I'm a single parent who separated in 2019.

The family home sold and was held in a lawyer trust account whilst the settlement was calculated. Prices rocketed in this time, and funds were only available in 2021, and priced out of the area we lived in.

I moved 40 minutes from Auckland central to afford a house and bought the cheapest house I could find with a 20% deposit, borrowing $800,000 in December 2020, at the peak of the market. I took a one and a half year fixed rate, which expires in July.

The house has gone down 10%, and the mortgage will go from 3.85% to estimated 7%, meaning an increase of nearly double.

The result? Sell the house and lose $100,000, with real estate fees, when the fixed rate ends.

There is no way a single income can pay the interest on $800,000 at 7%. It's now $56,000 from $30,800.

It affects only the unlucky ones, and the bank profits from higher margins.

Why can't banks' profits be limited during rate increases?

Or why can't the increased cost of borrowing and real estate commissions go to a scheme that gives back to housing or those that need it instead of the bank or sales people.

This country is so divided between the haves and the have-nots.

We knew this was coming, but not this fast or this high.

We live now in a world where we have other measures at our disposal to control inflation rather than just hiking interest rates.

Let's hope the rises stop now and the banks' margins are limited and reduced.

Concerns for housing stock value are short-term unless the Government targets help, underpins loans for a period, and banks offer assistance.

David Smitham

Good, bad, or indifferent?

If the OCR is set to rise to 5.5% next year, why not bite the bullet and set it at that figure now? Be bold and not timid.

Not that it will be nice for any of us, but surely it's better to get over the pain sooner rather than it be dragged out later?

The next two readers asked to remain anonymous, but we felt their stories were still worth sharing

My wife and I have been in a house we purchased five years ago. While our income has risen, we did take advantage of low interest rates, and carried out some necessary renovations during this time.

We now have a $600,000 mortgage on a house worth around $700,000-$800,000.

Although this value is falling, our combined income is a little over $160,000, so it is manageable for now.

The unfortunate thing is that we would like to separate, but neither of us will be able to buy out the other, or service this mortgage (our student loans are still sapping 12.5%).

Neither of us wants to sell at a loss under the current climate, so we are stuck together.

…

Firstly, I am appalled with this decision. There must be some other ways to control the current inflation, like issuing bond or tightening the monetary policy.

The Reserve Bank of New Zealand's governor doesn't seem to care about our welfare.

I am a homeowner, and my partner and I both work full time.

We think we will be homeless soon, as we won't be able to afford any extra money for the mortgage.

We have done everything to keep our budget tight. I don't see that the Government has stepped up to help the existing homeowners to keep their homes.

**How will the OCR rise affect you? Email your stories to stuffnation@stuff.co.nz.

* CLARIFICATION: An earlier version of this story quoted Jose MacDonald as saying his mortgage burden would increase as he moved up a tax bracket. Only the extra income he received above the new tax bracket would be taxed at a higher rate. (Amended November 29, 2022, 2.50pm.)**