A Tauranga investment expert is cautioning investors – and the public – to be wary of a 'time of pain” once interest rates begin to rise.

James Clague says historical low-level interest rates come with repercussions in the investment and property markets. New Zealand's benchmark interest rate currently sits at an all-time record low of two per cent, a far cry from the 8.25 per cent in June 2008.

'Across the years, central bankers globally have driven interest rates to historical low levels in the name of boosting economic growth.

'All the evidence since the financial crisis of 2008-2009 shows historically low rates have done little to boost growth. What they have done though is drive asset bubbles.”

James uses Sweden's central bank as an example.

'They raised rates between 2010 and 2011 to control overheated prices, only to begin lowering them again for fears of adverse economic consequences.

'Sweden's benchmark rate is now even lower at minus 0.5 per cent, with new housing loans available for less than two per cent.”

James, who has 17 years' business experience, wants people to understand the complexities within the investment sector.

He says a negative interest rate environment turns the fundamentals of a healthy financial system on its head.

Savers, who should be rewarded for saving and investing, are now punished for keeping money in ‘safe' products, such as high-grade bonds or the bank, while borrowers are rewarded through extremely low interest costs.

'With somewhere in the region of US$13 trillion of negative yielding bonds globally, there are significant stress points and that should drive caution. The public will suffer the pain of rising rates having been lured into expensive assets purchased with cheap money.

'The public tends to think there is a scientific process behind the central bank rate setting process, but that is not correct. Economic forecasting is not a science. The issues the Reserve Bank has faced, focusing on the inflation target while the Government maintains historical high levels of net immigration, is proof of the competing economic forces at play.

'While the central bank lowers the rate to supposedly boost inflation, other sectors of the economy like property require the exact opposite action.”

Which is why he questions whether it is time to reassess the wisdom of the inflation target and allowing central bank governors such unconstrained powers of decision-making over the direction of interest rates, which can have such consequences for economies.

James believes this unconstrained, misguided action has driven asset bubbles in the global markets and the property market isn't immune to this – evident in Auckland's sky-high property market, which is driving buyers out to the regions and causing an exuberant market.

Latest Real Estate Institute of New Zealand figures have the median house price across the combined Waikato/Bay of Plenty region reaching a record high of $458,500 – up $68,500 on September 2015.

James says it pays to be mindful in such an exuberant property market.

'If the global financial crisis taught the public anything, it is how interconnected the global financial markets are. New Zealand is not isolated from the coming interest rate increases in other major markets.”

He asserts the greatest barrier to successful investing is discipline, for professionals and the public alike.

'You need discipline, to have a solid mental framework and a controlled approach guiding your actions – and stick to it. Ignore the masses when things get heated and euphoric. If a good company is selling at an expensive price, then it is likely a bad investment. Price is paramount in the investing equation.

'It will often be a lack of discipline that trips up the investing public. Regardless of what asset class you are investing in, discipline is required.”