Westpac, SBS follow suit and raise mortgage rates

Westpac and SBS Bank have followed ASB, ANZ and National Bank in raising longer term fixed mortgage rates to over 6.5 per cent, despite the Reserve Bank's promise to keep the Official Cash Rate at 2.5 per cent until late next year.

Banks are reacting to a rise in interest rates on wholesale markets and higher rates needed to attract term deposits in New Zealand. The Reserve Bank has been pushing the banks to raise more funds locally to reduce their exposure to a freezing of global financial markets.

Yesterday, an ANZ economist warned that banks were likely to move quickly in raising rates as many borrowers were looking to fix their mortgages before rates rose. Only BNZ out of the big four has yet to move in the latest round of increases, while Kiwibank and TSB have also held out.

Banks have started to fight harder for term deposits in recent months following calls from the Reserve Bank to increase their share of domestic funding which would be putting upward pressure on mortgage rates.

Westpac raised its 18 month rate by 10 bps to 5.99 per cent; its two year rate by 30 bps to 6.55 per cent; three year by 45 bps to 7.40 per cent; four year by 55 bps to 7.95 per cent; and five year by 35 bps to 8.25 per cent.

Also this morning, SBS Bank raised its two year fixed mortgage rate by 20 bps to 6.55 per cent; three year by 46 bps to 7.45 per cent; and five year rate by 30 bps to 8.30 per cent. SBS does not offer a four year fixed rate mortgage term. Last week SBS raised its six month and one year rates by 10 bps.

Interest.co.nz