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Home loan rate rises are driven by the Reserve Bank pushing up borrowing costs to slow the economy.
ASB and Kiwibank have pushed up some of their fixed-term home loan rates, in some instances more than appears justified by rising funding costs.
ASB lifted its 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 followed ASB in lifting some of its home loan rates, increasing its six-month, two-year, and five-year home loans.
The moves come as a wall of home loan debt comes to the end of fixed terms, leaving borrowers nearing refixing facing mortgage rates close to levels seen during the global financial crisis.
The Reserve Bank Te Pūtea Matua has lifted its official cash rate (OCR) 12 times since August 2021 as it seeks to slow household spending in order to put the brakes on the economy, and bring inflation under control.
The increases to the OCR have pushed up bank borrowing costs, prompting them to progressively lift their home loan rates.
Economist Gareth Kiernan said wholesale money markets had risen a little, but ASB had lifted its rates by a greater amount.
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National Party leader Christopher Luxon is blaming the Government for the Reserve Bank’s latest increase to the OCR.
The moves in the money market were understandable, he said, as there was a spread of views on what the Reserve Bank would do with the OCR next, whether there would be another rise, and when rates would start to come down.
As well as being influenced by the OCR, banks were also making competitive pricing decisions, Kiernan said.
That could be behind Kiwibank lifting some rates, and leaving others untouched.
“Maybe it is trying to rebalance the range of lending it has got on its books,” he said.
Kiwibanks has increased its six-month “special” rate for people with 20% or more equity in their homes from 6.99% to 7.15%, and has moved its two-year rate up from 6.49% to 6.59%.
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Bank home loan rates have risen in the past 18 months as the Reserve Bank hiked its official cash rate, to push up borrowing costs to slow the economy.
People with less than 20% equity in their homes pay a “standard” rate at Kiwibank, which is higher than the special rate.
Kiwibank’s six-month standard rate is 8.15% compared to its 7.15% special rate.
ASB does not have special and standard rates.
Data from the Reserve Bank of New Zealand shows just how much home loan debt is due to come to the end of a fixed term.
At the end of May, about $67 billion of owner-occupier home loans were coming to the end of a fixed period by the end of November.
A further $58b in home loan debt comes to the end of a fixed period in the six months after that, its data shows.
Total home loans owed by owner-occupiers totalled just over $253b at the end of May. Property investors owe another $90b in home loan debt.
Consumer confidence continues to “languish at low levels” in the face of mounting financial pressures, despite a modest rise in consumer confidence, Westpac economists say.
“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,” said Westpac senior economist Satish Ranchhod.
