MORTGAGE SHOCK: Is this the new normal? Bank lifts home loan rates near 7 per cent

PHOTO: Kiwibank has increased a number of home loan rates. SUPPLIED

According to STUFF Kiwibank is increasing the interest rates charged on a number of its home loan terms, as homeowners face the prospect of more expensive mortgages than previously forecast.

Kiwibank has increased its two-year standard rate from 5.55 per cent to 5.85 per cent. Its special lifts from 4.55 per cent to 4.85 per cent.

For three-year terms, its special rate and standard rates each lift 20 basis points respectively, to 4.99 per cent and 5.99 per cent.

Its standard five-year rate is now 6.79 per cent, up from 6.16 per cent previously. Reserve Bank data shows five-year rates have not been that high since mid-2014.

Other main banks have five-year rates between 5.69 per cent and 6.09 per cent.

The rate of interest rate increase has surprised many commentators. In March 2021, the average five-year rate being taken out by borrowers was 3.78 per cent. In February this year, it was 5.47 per cent.

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For borrowers with a $500,000 home loan, the difference between those two rates is just over $220 a fortnight, on a 25-year loan term.

A significant increase in repayments is becoming a reality for more borrowers – Reserve Bank data shows $68 billion of owner-occupier lending is due to be refixed within the next six months. Another $100b will refix within six months to a year.

Earlier forecasts had been for retail home loan interest rates to peak at about 5 per cent.