PHOTO: Westpac has become the first major bank to increase a range of its fixed mortgage rates this week.
New Zealand homeowners could be facing another round of mortgage pain, with major banks beginning to lift home loan rates following the Reserve Bank’s recent Official Cash Rate (OCR) increase and rising wholesale funding costs.
After months of falling borrowing costs, the tide appears to be turning.
Westpac has become the first major bank to increase a range of its fixed mortgage rates this week, citing higher wholesale funding costs driven by global market volatility. The bank increased its advertised one-year special rate by 0.20% to 4.99%, while its two-year special rate rose to 5.39%.
Earlier this month, ANZ, ASB, BNZ, Kiwibank and Westpac also lifted their floating mortgage rates after the Reserve Bank raised the OCR by 0.25 percentage points.
More Increases Could Be on the Way
While competition remains strong between lenders, economists are warning that borrowers shouldn’t expect mortgage rates to fall again anytime soon.
The Reserve Bank has signalled inflation remains a concern, while rising global funding costs have already started feeding through into bank lending rates. Analysts believe further OCR increases remain possible if inflation proves stubborn.
For homeowners coming off historically low fixed rates over the next 12 months, refinancing could mean significantly higher repayments.
Current Major Bank Special Fixed Rates*
| Bank | 6 Months | 1 Year | 2 Years |
|---|---|---|---|
| ANZ | 4.69% | 4.79% | 5.29% |
| ASB | 4.69% | 4.75% | 5.25% |
| BNZ | 4.69% | 4.79% | 5.29% |
| Kiwibank | 4.65% | 4.75% | 5.19% |
| Westpac | 4.69% | 4.99% | 5.39% |
*Indicative owner-occupier special rates. Eligibility criteria apply and rates can change without notice.
Borrowers Urged to Shop Around
Despite the recent increases, there are still noticeable differences between lenders, particularly for one and two-year fixed terms.
Mortgage advisers say homeowners nearing the end of a fixed term should compare offers from multiple banks and negotiate with their existing lender before refixing, as advertised rates are often not the lowest rates available.
With the Reserve Bank maintaining a cautious stance and wholesale funding costs remaining elevated, many borrowers may need to prepare for a period where mortgage repayments stay higher than they had hoped.