The Reserve Bank predicts floating mortgage rates will rise to 7 or 8 per cent over the next two or three years and says buyers who entered the market in recent years with small deposits will be disproportionately affected.

ANZ's economists said this week that there increasing justification for the first OCR hike to happen in January, rather than March or June, as had been predicted.

New Zealand's house price-to-income ratio is 26 per cent above its long-term average, according to the OECD.

Over the past year, the growth of household debt has outpaced income growth and the debt-to-disposable-income ratio is approaching historic highs.

BNZ chief economist Tony Alexander said it was likely that some people had become complacent after years of rates at historic lows. Most loans are still either floating or fixed on short terms, so the impact of rates rises would be felt quickly.

In its recent Financial Stability Report, the Reserve Bank said recent low mortgage rates might have encouraged people to bid more for properties than they otherwise would. Low interest rates have made higher prices easier to bear. Without them, households may struggle.

Massey University banking expert David Tripe said: "There is some question in my mind as to some of the marketing done by some of the banks. I have a strong suspicion that some people haven't really taken account of the risk, simply because they have been so enthusiastic about selling loans here and there."

ANZ's head of mortgages, Sarah Berry, said banks assessed customers' ability to pay higher rates when they issued a loan. But she said banks needed to talk to customers to make sure they were prepared.
Bruce McLachlan, of The Co-Operative Bank, said people would have adapted their household budgets to the new rates. “If they’re stretched at the moment, they won’t appreciate an increase.”