Government housing failure forces up interest rates

Homeowners and first home buyers will feel today’s interest rate increase as the tightening of the noose, says Labour’s Finance spokesperson David Parker and Housing spokesperson Phil Twyford.

“The Government has been incapable of reining in the out-of-control housing market, leaving it instead to the Reserve Bank,” says Phil Twyford.

“Homeowners will have a sickening feeling in the pit of their stomach today, knowing there are several more increases in the pipeline that will add hundreds of dollars to monthly mortgage repayments.

“The Reserve Bank Governor said mortgage interest rates will get close to 7% by the end of the year, adding $233 to monthly costs on a $300,000 mortgage

“National has been quite happy to sit and watch first home buyers and ordinary Kiwi families either shut out of the housing market or financially squeezed, while property speculators and the big end of town clean up,” says Phil Twyford.

“Today’s rate rise follows five years of out-of-control house price increases which have seen the average Auckland house rise over 40% while National has been in government,” says David Parker.

“In Auckland, where prices are highest, it is not uncommon for people in the last few years to have taken on mortgages twice that size. As the year goes on those people are really going to feel the heat.

“Interest rates rises not only hurt homeowners they also put the squeeze on all businesses. Exporters suffer the double blow of a higher exchange rate and higher borrowing costs

“Yesterday the trade weighted index hit a post-float high, showing how tough it is for exporters outside of the primary sector.

“Low interest rates due to the global financial crisis were the only thing National could claim were working for homeowners.

“Now you can add rising interest rates to sky high prices in Auckland, extortionate rents in post-quake Canterbury and LVR lending restrictions that have shut first home buyers out of the market.

“This Government’s housing policy is in tatters,” says David Parker.

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