ANZ National lifts mortgage rates

The ANZ National Bank group has confirmed it is to lift mortgage rates today, a move expected to be followed by other major banks.

The move will add more financial pain to hard-hit New Zealand households struggling with price rises for petrol, electricity and rates.

A spokesman for ANZ National told NZPA the ANZ two-year fixed rate was moving from 7.99 per cent to 8.3 per cent, with a similar move at National.

At both banks the three-year rate had moved to 8.2 per cent, from 8 per cent at ANZ and 7.95 per cent at National.

The new rate was equal to peak rates from late last year.

For a $100,000 loan, the rise in the two-year rate will bump up fortnightly repayments by about $8 to $448.

The Dominion Post reported today that Westpac, BNZ and ASB Bank all said they were reviewing rates.

Bank lending rates are rising because it is costing banks more to borrow in the wholesale market.

Rates in that market are increasing in part because inflation has risen to an unexpectedly high 4 per cent and interest rates overseas are up.

The higher-than-expected inflation data on Monday had sent "shockwaves" through the market, Macquarie Research Economics said yesterday.

There was renewed speculation the Reserve Bank would resume hiking official interest rates by the end of the year.

"Indeed, the market is now almost ruling out the chance of a rate cut in 2006, but more importantly, it is pricing in a 50 per cent chance of a rate hike by year end," Macquarie said.

Smaller banks which pride themselves on keeping mortgage rates below those of the bigger players are also looking carefully at their rates.

At TSB Bank, where a two-year fixed term is available at 7.65 per cent, managing director Kevin Rimmington said the bank would be looking at rates today in light of ANZ National's move.

Kiwibank spokesman Bruce Thompson said "we're not making any immediate changes but we're watching pretty closely".

"We like to keep a margin below the big banks, particularly in the very competitive areas of the two-year rate which is one of the main playgrounds at the moment."

Kiwibank's two-year fixed rate was now 7.75 per cent.

"How long that can hold in the current environment, I can't call," Mr Thompson said.

But the bank would be "loathe" to go over 8 per cent on its fixed rates for periods of two years or above.

Two-year fixed rates were proving to be popular as people effectively took a holding position, in the expectation rates would fall before the end of the term.

- NZPA