PHOTO: Kiwibank (file picture). (Source: 1News)

Kiwibank is set to hike its home loan rates by 0.5% next week.

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It applies to both normal and special rates for those with 20% equity.

It means that a one-year fixed home loan will now increase from 5.89% to 6.39% per annum.

In a statement, Kiwibank said the hikes in interest would continue until the bank sees a clear turn in inflation.

“[We] know the volatility in interest rates in recent years has been dramatic, but we expect interest rates to peak in the first half of 2023 as the economy cools and inflation eases,” Kiwibank said.

The new rates will come into effect on Monday, 12 December.

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In June, ANZ, New Zealand’s largest bank, put up both mortgage and term deposit rates.

Kiwibank says that while households who borrow money will need to pay a bit more, households who save will be receiving term deposit rates above 5% per annum.

“Those who are dependent on income from their savings, for example, retirees, have more in their pockets,” Kiwibank said.

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“So, while some households pay higher interest rates on their home loans, other households receive more in interest income.”

It comes after the Reserve Bank lifted the Official Cash Rate to 4.25% in late November, and inflation hit 7%.