In addition, we have spoken out frequently about the need for home-owners to show care in increasing their borrowings and to increase and diversify their savings. These past interest rate hikes have slowed housing price growth. But it is still growing at around 14 per cent, driving unsustainable levels of consumer spending.
The impact of higher rates on spending levels has been slower than in other periods because the effective mortgage rate has increased more gradually than the OCR. Global interest rates have been unusually low, reflecting loose monetary policies in a large part of the OECD, and supply of savings out of East Asia.