Rate hikes narrow BNZ’s edge as markets eye more OCR rises
BNZ has lifted several fixed-term mortgage rates for the second time in a fortnight, narrowing the pricing edge it held over other major banks and adding pressure for borrowers weighing when to fix.
The bank has increased three standard fixed rates by 10 basis points: its 18‑month term to 4.95%, two‑year to 5.19% and three‑year to 5.39%, 1News reported.
Those with less than 20% equity will continue to pay a low‑equity premium on top. The latest move follows BNZ’s 23 April increases, when the same 18‑month and two‑year terms rose by six and 20 basis points respectively.
Analysis by interest.co.nz notes that BNZ’s 18‑month rate now matches ASB as the lowest among the major banks, while the two‑year rate matches Westpac at 5.19%. The three‑year rate, however, now sits above Westpac’s 5.29%, reducing BNZ’s competitive advantage at that term.
Wholesale markets, inflation, and RBNZ path in focus
Banks are responding to higher funding costs and shifting expectations for official rates, with rising wholesale interest rates directly lifting the cost of funds for new lending.
As 1News noted, “The changing interest rates come as banks deal with moving wholesale interest rates, which drives what it costs banks to borrow the money they lend.”
Recent RBNZ data show robust mortgage demand relative to business and rural lending, while the housing market is softening on volumes and prices and inflation remains elevated – factors interest.co.nz says will influence “where our fixed rates go from here”.
The Reserve Bank held the official cash rate at 2.25% at its last review, with the next decision due on 27 May, one day before the government’s budget. Market pricing suggests investors expect no move this month but are factoring in a series of hikes over the following reviews, with the OCR seen reaching around 3.50% within a year.
More fixed-rate increases likely if benchmarks keep rising
Global developments are adding further upward pressure on benchmark yields and the swap rates that feed into fixed mortgage pricing. The conflict in the Middle East has pushed up oil prices, reinforcing concerns that central banks may need to tighten policy again to keep inflation in check.
Geopolitical tensions have already lifted global bond yields, and markets expect the Reserve Bank of Australia to raise its cash rate, signalling that fixed mortgage rates for one‑year terms and longer could move higher even before RBNZ changes the OCR.
Taken together, these signals point to a rising interest rate path over the next year, increasing the risk that borrowers who delay fixing will face larger repayments.
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