Home loan affordability deteriorated sharply in October after house prices rose to record levels and fixed mortgage interest rates rose to their highest levels this year, the BNZ Home Loan Affordability measure shows.

Rising house prices and interest rates combined in September to weaken home loan affordability to its worst level since December 2008, the BNZ Home Loan Affordability measure shows.

The national home affordability index improved by 2.3 per cent in the three months to the end of August, thanks largely to lower interest rates for mortgages. But it is questionable whether the current low interest rate environment can be sustained.