The beginning of the end may have begun for record-low mortgage rates in New Zealand.

And it has come months earlier than experts predicted.

Lenders have recently been offering home-owners the lowest short-term bank mortgage rates in history, as they competed to lure customers before rates began increasing.

The increase was predicted to come early next year, the result of an expected hike to the Official Cash Rate by the Reserve Bank.


But yesterday's announcement by Kiwibank that it was raising its two-year fixed rate was said by some to signify the death of the low mortgage.

The new rate of 5.45 per cent will be introduced today, up from 5.25 per cent.

David Hargreaves, of financial news website, said Kiwibank had been at the forefront of offering cheaper mortgage rates, so the increase was a "further sign that super-low rates are on the way out".

"Homeowners have been rushing to fix their mortgage rates in the expectation that the Reserve Bank will start increasing official interest rates, at the very least, early next year."

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub told the Weekend Herald that Kiwibank's rate had risen "within cooee" of the usual variability.

"Over the next couple of years, we expected mortgage rates to rise by around 2 per cent. Interest rates can move around depending on a range of variables. Largely driven by international borrowing costs, which have gone up recently, and margins - they go down when banks are competing to lend more money," he said.

"Typically bank mortgage rates move together, so expect some other mortgage rate increases."

Mr Eaqub said recent rates had been very low. "They are more likely to rise than fall over the next few years. What we are seeing right now may just be some volatility. There has been a sudden lift in international interest rates. This is lifting mortgage rates, particularly for fixed terms. Floating mortgage rates tend to be influenced by the RBNZ, which has not moved much."

Latest advertised mortgage rates show that in five years ANZ, BNZ and TSB Banks will demand 6.3 per cent interest on standard fixed-mortgage rates. ASB, Kiwibank and Westpac would be at about 6.25 per cent, HSBC at 5.75 per cent and SBS/HBS at 5.65 per cent.