The Reserve Bank is warning Kiwis with mortgages to be prepared as they could face big hikes in loan repayments if renewed instability in global share markets spills over to the international interest rate markets.
Volatility returned with a vengeance to world share markets this week, with Wall Street down slightly again overnight.
For now, New Zealand's central bank is unfazed, delivering an upbeat assessment of the economy today, while leaving the official cash rate on hold again at 1.75 per cent, due to weak local inflation.
"While these forecasts were closed off ahead of the recent equity market volatility, at this point we would see no reason to alter the forecasts," said Grant Spencer, Acting Reserve Bank Governor.
However, Mr Spencer is warning that should the share market turmoil spread to global interest rate markets, it would have a much bigger impact as he says they are a crucial source of funding for local banks.
"It is a bit of a warning shot that there could be more volatility down the track."
And Mr Spencer says Kiwis on fixed mortgage rates should now be thinking about how they would cope if their interest rate spiked by two per cent.
"It's no particular forecast, but to say if you can handle another two per cent then that gives you a bit of comfort."
Westpac's economists aren't seeing any sign of fixed mortgage rates creeping up just yet.
But they agree they are likely to go up over time and borrowers are right to be cautious.
"I do think Grant Spencer makes a good, broader point though that today's interest rates aren't going to last forever, " said Dominick Stephens, Westpac Chief Economist.
However Mr Stephens doesn't share the Reserve Bank's rosy outlook on the economy.
"Our concern is that Government policies aimed at slowing the housing market will work, but gosh that's going to have a flow-on effect to the wider economy," he said.
And Mr Stephens says when it comes to the Reserve Bank's official cash rate, it's likely to have to stay lower for a lot longer than forecast.