The effective interest rate paid on home loans has risen by little more than half the corresponding rise in the level of official rates in New Zealand and households are increasingly insensitive to interest rate rises the Reserve Bank noted in its latest statement on monetary policy.The RBNZ yesterday lifted its target for the official cash rate to 8.0 per cent from 7.75 per cent, making an already restrictive monetary policy more so.The latest increase is the tenth incremental increase in the cash rate since early 2004, and the third this year.Whether this policy is having much effect on domestic demand as past projections would suggest, or doing much to curtail inflation (which is already down to 2.5 per cent from a recent, oil price-related spike of 4.0 per cent in 2006) is arguable.Growth in domestic demand has increased as has the rate of credit growth following a lull in mid 2006.The RBNZ said the effective interest rate paid by households with mortgages was about 1.2 percentage points higher than when the current cycle of tightening of monetary policy began in early 2004. The official cash rate has increased by 2.25 percentage points over that time.The central bank appears to be counting borrowers - the bulk of whom have home loans at fixed rates - experiencing an interest rate shock when they refinance or their loans are repriced.The RBNZ said almost 30 per cent of the existing mortgage debt on fixed rates will reprice over the next 12 months from an average rate of 7.8 per cent.The RBNZ said that based on current mortgage rates this group of borrowers would face increases of between 0.7 and 1.0 percentage points.Fifteen per cent of current borrowers are on variable rates.The RBNZ noted that fixed mortgage rates are now 40 to 60 basis points higher than three months ago. The bank also said that most new fixed rate loans were being written for terms of longer than two years, a slight shift from the pattern where terms of 18 months to 24 months terms dominated.The average duration or time to re-pricing of mortgages has increased to about 19 months for all mortgages and about 23 months for fixed rate mortgages, reinforcing the fact that existing borrowers are increasingly insensitive to short-term interest rate movements.