Homeowners expected to feel the pinch after Reserve Bank hikes official cash rate

Block your eyes homeowners, paying the mortgage is going to get even more expensive.

For the first time ever, the Reserve Bank's consecutively hiked the official cash rate (OCR) by 50 basis points. It now sits at 2 percent - its highest level since 2016.

It's been a year of homeownership for Jason Williams and his dog Penny, and so far they're loving it.

"When we first got our mortgage we fixed it at 2.9 percent, we were actually expecting it to be lower this year so we just fixed for the one year."

But unfortunately for them, rates are going in the opposite direction, so Williams is acting fast.

"We've been working with our broker to try and rush through refixing our mortgage ahead of time as we're expecting it's going to go up again, we're just trying to refix now before it gets any higher."

And it is - the Reserve Bank raising the OCR by half a percent on Wednesday - the second time in two months.

"It remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment," said Reserve Bank Governor Adrian Orr.

The move was expected as the 30-year-high inflation wave continues.

"We need to slow the growth and demand until it is better aligned with the ability to supply that demand. In the absence of that, inflation will keep going higher," Orr added.

A refinancing wave is also on the horizon, it's estimated that half of all existing fixed home loans will roll over this year.

Mortgage advisor Jamie Sanderson warned some people may be in for a bit of a shock.

"An average home loan of about $500,000 in New Zealand - that's going to equate to about $950 a month if they're going from 2.5 percent up to about 5.5 percent, that's about $11,000 people will have to start budgeting for."

And Infometrics principal economist Brad Olsen said it's not expected to get any easier.

"The era of cheap easy money is over."

Our central bank forecasts the OCR may now peak at 3.9 percent in June next year.

"Households are going to have to look at these rising interest rates and adjust their expectations," Olsen said.

"That means they're not going to have as much money left over for other things because their mortgage will simply continue to increase."

Lucky for Williams and Penny - they managed to lock in a new rate just in time.