MORTGAGE PAIN: BNZ keeps lifting home loan rates

PHOTO: The Bank of New Zealand (BNZ). FILE

The Bank of New Zealand (BNZ) has recently raised interest rates on several of its home loan terms, leading to questions from economists. The changes include an increase in the classic fixed six-month interest rate from 7.25% to 7.39%, as well as the four- and five-year rates from 6.29% to 6.49%. Additionally, the standard six-month rate has been raised from 7.85% to 7.99%, and the standard four- and five-year rates from 6.89% to 7.09%.

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When Westpac previously increased its rates, Infometrics chief executive Brad Olsen remarked that banks would need to explain any further interest rate hikes. The official cash rate (OCR) was left unchanged at 5.5% during the Reserve Bank’s recent review, with the central bank indicating it might be the peak rate, although some economists have suggested a potential need for another increase. Olsen pointed out that wholesale rates hadn’t experienced significant changes during that time.

Regarding the recent rate adjustments by BNZ, Gareth Kiernan, chief forecaster at Infometrics, mentioned volatility in wholesale markets over the last month. While longer-term wholesale rates had seen a sharp decline between July 10 and 18, there was an overall upward trend afterward, though they hadn’t surpassed the mid-July peak.

Kiernan stated that the increases in four-year and five-year rates seemed to align with the upward pressure in the longer end of the wholesale markets. However, the raise in the six-month rate was harder to explain, especially given BNZ’s stance that the OCR had reached its peak at 5.5%, with no further increases expected from the Reserve Bank.

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According to Olsen, BNZ’s six-month special rate appeared to be “out-of-step” with other banks’ offerings. Kiwibank, for instance, had a special six-month rate of 6.99%, while Westpac and ANZ offered 7.19%, and ASB provided 7.25%. Given the lack of changes in the OCR, the outlook for the OCR, and other short-term funding rates, Olsen couldn’t find a strong justification for the increase in BNZ’s six-month rate.

As of now, BNZ has not yet responded to requests for comments on the matter.