New Zealand's housing market is expected to cool in 2015 on the prospect of more interest rate hikes by the Reserve Bank, according to rating agency Fitch Ratings.

National house prices are expected to rise 2.5 per cent with higher interest rates increasing the cost of servicing mortgages and as building rates in Christchurch and Auckland boost supply, Fitch said in its global housing and mortgage outlook on Tursday.

That’s less than half the six per cent annual pace in the 12 months ended November 30 in the Real Estate Institute’s stratified housing index, which strips out peaks and troughs in prices. The REINZ is expected to release its December update this week.

“Most existing borrowers in New Zealand are more immune against the expected continued rate rises as the market is largely composed of short-term fixed rate loans,” Fitch said.

“However, new buyers do not benefit from this protection, which will keep house price growth low.”

The Reserve Bank hiked the official cash rate four times to 3.5 per cent, from 2.5 per cent, in 2014, having introduced restrictions on low-equity home lending in October 2013 as a means to cool the property market without putting upward pressure on the currency.

While New Zealand house prices are likely to slow their gain this year, Fitch anticipates housing affordability for new loans will get worse in 2015 as the increase in prices and higher interest rates take up a larger portion of households’ disposable income.

Fitch said mortgage rates are seen rising with the official cash rate, though falling oil prices and tepid inflation in recent months has prompted local economists to push out their timeframes for the next rate hike by the Reserve Bank.

Lenders have already cut some mortgage rates this year in anticipation of renewed interest in the property market.