Dwelling prices and interest rates


Auckland Council Chief Economist,David Norman

Publication date:



Economy, business and industry, Housing


Auckland Council Chief Economist's Office


Insights on the Auckland economy.

Main points:

Mortgage rates are rising slowly and this has some impact on dampening house price growth.
Effective interest rates would have to rise sharply for there to be a significant impact on house prices, given the underlying demand and supply situation.
Alternatively, there would have to be a dramatic fall in existing demand and/or unprecedented growth in housing provision.

Many economists, including us, lay a portion of the blame for rapid house price rises in recent years on lower interest rates. According to the Reserve Bank, the effective mortgage rate for home loans fell from 8.82% in September 2008 to just 4.85% as of February 2017. The question thus arises as to what impact rises in the effective mortgage rate have on house prices. ...