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GOOD news for migrants due to arrive in New Zealand within coming months is that home mortgage interest rates could hit 9 per cent, throwing the housing market into a tailspin.
This would take the heat out of house prices and almost certainly drive them down from their present record highs.
The Reserve Bank bumped up official interest rates to 6 per cent the fourth increase this year, and made it clear another jump would follow in September.
Economists said another rise in October also looked likely.
"Further tightening of monetary policy looks likely," Reserve Bank governor Alan Bollard said.
Westpac Bank has lifted its floating mortgage rate by 0.25 per cent to 8.35 per cent.
Higher rates will hit the housing market, which is already stalling to cool after a boom year, up more than 20 per cent in the year to March.
Nationally, house prices have dipped slightly and some banks still forecast a 5 per cent fall in prices next year.
ASB Bank economists expect the cash rate to move to 6.5 per cent by the end of October. As a result, floating mortgage rates could rise to 8.5 per cent "or higher" by the end of the year, economists said.
The higher interest rates will sting buyers locked into extremely low fixed-term rates a year to 18 months ago, who now face the impact of the low rates ending.
National Bank chief economist, John McDermott said there might be a 'nasty shock' for some people who had low fixed-term mortgage interest rates last year, but now face rises of up to 1.5 per cent.
Westpac Bank economists said the rate rise was probably not needed and this year's rises would be next year's cuts.
New Zealand's interest rates are already the highest in the industrialised world.