ASB first big bank to hike rates

Photo / Natalie Slade

In the first move by a bank since the Official Cash Rate was lifted last Thursday, ASB and its subsidiary Sovereign have hiked their floating mortgage rates in line with the Reserve Bank's move of 25 basis points - 0.25 per cent.

ASB was also the first to hike rates when the Reserve Bank lifted the Official Cash Rate at its June meeting.

But they have followed a move lower in longer term wholesale interest rate markets by cutting their longer term fixed mortgage rates by 5 to 15 basis points.

This narrows the gap between the floating rate and the traditionally more popular 18 month to 2 year rates to just 40 basis points, making the fixed versus floating decision even tougher.

More than half of new mortgages are now floating rather than fixed rate mortgages, lifting the proportion of total mortgages that are fixed versus floating to almost 40 per cent from just 12 per cent three years ago.

This gives the Reserve Bank more potency as it looks to remove stimulus from the economy.

Sovereign lifted its six month mortgage rate by 25 basis points to 6.5 per cent and left its one year rate unchanged at 6.6 per cent. It lifted its floating rate by 25 basis points to 6.35 per cent.

But it cut its 18 month mortgage rate by 15 basis points to 6.75 per cent from 6.9 per cent.

Sovereign cut its 2 year rate to 7 per cent from 7.1 per cent and cut its 3 year rate by 5 basis points to 7.35 per cent.

It cut its 4 and 5 year rates to 7.6 per cent and 7.9 per cent respectively.

ASB lifted its variable mortgage rate 25 basis points to 6.25 per cent and its 6 month rate by 25 basis points to 6.35 per cent.

It cut its 18 month rate by 15 basis points to 6.60 per cent and its 2 year rate by 10 basis points to 6.85 per cent.

ANZ, National Bank and HSBC said they would continue to review rates, while Kiwibank said it was inevitable it would be hiking rates following last week's announcement.

"We are considering our position and watching our competitors," a spokesperson said.

Westpac said its rates remained unchanged.

See all mortgage rate moves here.

The Reserve Bank hiked the Official Cash Rate for the first time in almost two years - from 2.5 per cent to 2.75 per cent - in June.

The OCR was lifted to 3 per cent last Thursday.

Of the banks ANZ-National was the first to move later in June with significant cuts to longer term fixed mortgage rates after wholesale interest rates moved sharply lower.

Earlier this week the NZ Anglican Church Pension Board was the first institution to raise its rates.

It lifted its floating mortgage rate by 25 bps to 5.95 per cent. It also raised its one and two year rates, but cut its 3 year rate to 7.1 per cent.

Financial markets have reduced market rates on concerns about a slowdown in the global economy reducing longer term inflationary pressures.

- www.interest.co.nz / NZ Herald Online