Rate rises are driven by RBNZ's rate hikes
ASB and Kiwibank have increased some of their fixed-term home loan rates, as tens of billions worth of home loan debt comes to the end of their fixed terms this year.
ASB raised six-month and one-year fixed-term rates for standard home loans by 20 basis points to 7.25%, and its two-year rate to 6.79%.
Kiwibank, too, increased some of its home loan rates, lifting its six-month, two-year, and five-year home loans, Stuff reported.
The latest rate moves from ASB and Kiwibank will see borrowers nearing the end of their fixed-term loans facing mortgage rates close to levels seen during the Global Financial Crisis.
This comes after the Reserve Bank of New Zealand raised the cash rate 12 times since August 2021 in a bid to put inflation under control, which in turn, pushed up borrowing costs, prompting lenders to progressively increase their home loan rates.
Gareth Kiernan (pictured above), chief forecaster and director at Infometrics, noted that while wholesale money markets had a slight rise, ASB had increased its rates by a greater amount.
Kiernan said the moves in the money market were understandable, given the spread of views on what the central bank would do with the OCR next – whether it would continue to hike, or start to cut down rates.
Not only are banks influenced by the OCR, they are also making competitive prices decisions – which he said could be the reason why Kiwibank lifted some rates, and left others untouched
“Maybe it is trying to rebalance the range of lending it has got on its books,” Kiernan said.
Kiwibank’s six-month “special” rate for people with 20% or more equity in their homes increased from 6.99% to 7.15%, while its two-year rate lifted from 6.49% to 6.59%.
Kiwibank customers with less than 20% equity in their homes pay a “standard” rate of 8.15%, which is higher than the bank’s 7.15% special rate.
ASB does not have special and standard rates.
According to RBNZ data, at the end of May, around $67bn of owner-occupier home loans will roll off their fixed term by the end of November.
An additional $58bn in home loan debt will then come to the end of their fixed period after a further six months.
Total home loans owed by owner-occupiers have a total value of more than $253bn at the end of May, with property investors owing a further $90bn in home loan debt.
Westpac economists said consumer confidence has continued to “languish at low levels” in the face of growing financial pressures, despite a slight uptick in consumer confidence.
“More than 40% of households have told us that their financial position went backwards over the past year, while only 14% said that their financial position had improved,” Satish Ranchhod, Westpac senior economist, told Stuff.
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