Co-operative Bank hikes mortgage rates by massive 30 basis points

Longer-term mortgage rates are marching back up. Photo / 123RF

The Co-operative Bank has become the second major lender to lift its long-term mortgage rates by as much as 30 basis points, just days after Westpac.

The move comes just weeks after the Reserve Bank (RBNZ) cut the official Cash Rate (OCR) by a further 25bps.

The Co-operative Bank said all its two- to five-year fixed home loan rates across its owner-occupied – for those with minimum 20% equity – and standard terms would increase by 30bps, effective today.

Its two-year owner-occupied fixed rate would jump from 4.49% to 4.79%, while its three-year rate increases to 5.09%.

The four-year rate will rise to 5.29% and the five-year rate moves up to 5.49%.

The bank’s standard two-year fixed rate will increase from 4.99% to 5.29%, while its three-year term moves from 5.29% to 5.59%.

The Co-operative Bank is cutting both its owner-occupied and standard six-month terms by 14bps to 4.65% and 5.15%, respectively.

Mark Wilkshire, Co-operative Bank chief executive, said fixed-rate mortgages are influenced primarily by wholesale interest rates.

“As long-term wholesale rates have risen quickly in recent weeks, on the expectation we are around the bottom of the interest rate cycle, we have had to start to increase our longer-term fixed home loan rates.”

Wilkshire said the changes to longer-term rates had been balanced by increasing term deposit rates, benefiting savers.

Term deposit rates for two years will increase 20bps from 3.50% to 3.70%, while its three and four-year terms jump 30bps to 4% and 4.10%, respectively.

Wilkshire said the bank continues to offer the lowest widely available floating home loan rate in the market.

“This benefits a significant number of our customers, with around one-third of customers having part of their home loan on a floating rate.

“Over the last four years, on both the last OCR rates upcycle and downcycle, The Co-operative Bank has passed on to its floating home loan customers the largest cut to rates on the way down and the smallest increase on the way up.”

Earlier this week, Westpac announced it was lifting its two- to five-year fixed mortgage rates by 30bps.

Westpac said wholesale rate rises were behind its decision.

The OCR tends to affect banks’ shorter-term rates, while wholesale markets influence their longer-term rates.

Two-year swap rates are about 40bps above where they were before the Reserve Bank cut the OCR by 25bps to 2.25% on November 26.

Meanwhile, the Herald reported that ASB was temporarily removing the discounts it offers some of its home loan customers.

The bank isn’t offering discounts on any of its mortgage rates, except for its six-month and floating rates – a change that it has told mortgage brokers of but hasn’t publicised.