John Bolton - 'The everything bubble's popping and property has probably done comparatively well'

<p>Whilst the Reserve Bank views the Official Cash Rate (OCR) at its current level of 2% as neutral in that it's neither stimulating nor constraining economic activity, the steep rise in mortgage interest rates over the past year means they are well past a neutral level and are unlikely to rise much further, mortgage broker John Bolton says.</p><p>Bolton, founder and executive director of mortgage broker Squirrel Mortgages, spoke to interest.co.nz for the latest episode of the <a href="https://www.interest.co.nz/category/tag/interest-podcast" target="_blank"><i><strong>Of Interest Podcast</strong></i></a><strong>.</strong></p><p>While the average bank two-year fixed mortgage rate, typically the most popular term with New Zealand borrowers, bottomed out at about 2.51% in mid-2021, it's now at 5.4%. This type of move leads to big repayment increases, or <a href="https://www.interest.co.nz/index.php/personal-finance/116532/its-now-12-months-mortgage-interest-rates-bottomed-out-anybody-who-fixed" target="_blank"><strong>mortgage shock</strong></a>, for borrowers when they refix their mortgages. </p><p>But Bolton says after the sharp rise in mortgage rates, he believes they are starting to peak.</p><p>"I don't think they're going much higher. We are going to go into a recession, and I think even in the last week or so you've started to see the swap [rate] market come off a little bit. I think the economy's going to come off quite hard and fast, and you're going to see those longer term swap rates [which influence bank mortgage rate pricing] come back a bit," says Bolton.</p><p>"We talk about the OCR being neutral at 2% but we are not neutral, we are way past neutral at the moment. Because the Reserve Bank has talked it up so hard that mortgage rates are already pretty much pricing in every [future] OCR increase. We've tightened incredibly fast. So it's not surprising that has flowed through to the housing market. I mean we shouldn't be surprised."</p><p>The Reserve Bank is forecasting the OCR <a href="https://www.inte