PHOTO: Kiwibank. FILE
Kiwibank to Increase Fixed Home Loan Rates and Term Deposit Rates
In a recent announcement, Kiwibank revealed its plans to raise the interest rates for a variety of its fixed home loans, effective from today (Monday 17 July, 2023). Additionally, the bank will also increase its term deposit rates. These changes come despite the Reserve Bank maintaining the official cash rate during its latest review.
Home Loan Rate Increases
Kiwibank will raise the rates on fixed home loans across various terms, including one, two, three, and four-year fixes. Here are the details of the rate adjustments:
- One-year special rate: The rate will increase from 6.89% to 6.99%.
- Standard one-year rate: For borrowers without 20% equity, the rate will rise to 7.99%.
Comparatively, other major banks offer standard rates ranging from 7.59% to 7.89% for one-year terms. Kiwibank’s two-year rate will experience a 20 basis point increase, shifting from a special rate of 6.59% to 6.79%, and a standard rate of 7.79%.
Term Deposit Rate Increases
In addition to the home loan rate adjustments, Kiwibank will also raise its term deposit rates. However, specific details regarding the magnitude of the increases were not provided in the given information.
Outlook and Economic Analysis
Despite the Reserve Bank’s decision to maintain the current official cash rate at 5.5%, interest rates have been on the rise. The central bank has indicated that it does not anticipate any rate cuts in the foreseeable future. According to ASB economists, there is a higher likelihood of another rate increase throughout the year, as long as clear data indicating a decline in inflation is absent.
While an upcoming consumer price index update is expected to show a cooling of inflation, it is unlikely to happen rapidly. On the other hand, Westpac economists predict that the official cash rate will be raised to 5.75% in the following month. They emphasize the importance of upcoming economic indicators, such as the June quarter CPI and labor market report, in determining the Reserve Bank’s stance on rates and inflation.
Despite the Reserve Bank’s current view on unchanged rates, the persistence of core inflation pressures and the strength of the labor market may require a reassessment of growth forecasts. Consequently, the likelihood of tightening measures in August remains uncertain, but the possibility has not been ruled out completely.
Kiwibank’s decision to increase interest rates on fixed home loans, alongside the adjustment of term deposit rates, reflects the current trend of rising interest rates. Economic indicators, including inflation and labor market data, will play a crucial role in determining the Reserve Bank’s future decisions regarding monetary policy.