ASB lifts interest rates - first bank to move

ASB Bank has become the first of the big retail banks to increase mortgage rates after the Reserve Bank hiked the Official Cash Rate by 0.25 percentage points last week.

It has lifted its floating rate from 5.75 per cent to 6 per cent and also raised its six month fixed lending rates by the same amount to 6.10 per cent.

Its one year rate has gone up by 0.10 percentage points to 6.45 per cent.

Many were expecting the big retail banks to move quickly to lift their rates after last Thursday's Reserve Bank hike, but they have been staring each other down for a full week, each waiting for a rival to make the first move and risk possible negative publicity.

Director of banking studies at Massey University, David Tripe, said other banks will follow shortly but just when is "a bit of a lottery".

He said banks have held off raising rates after the Commonwealth Bank - ASB's owner - was the first in Australia and received negative media coverage.

"The markets are close enough for them to be impacted by perceptions. That has something to do with it but on the other hand the New Zealand market is not the same as the Australian market," said Tripe.

ASB spokeswoman Catherine McGrath said variable savings account interest rates will also increase by 25 basis points.

However, rates on term deposits would not be increasing.
"We're looking at variable parts of the loan book," McGrath said.

She said the bank's floating rate had been unchanged at 5.75 per cent since September 2009.

McGrath said ASB believes the Reserve Bank will continue to raise the OCR.

"The increases we are making today take into account both our offshore funding costs and the continuing pressure on retail deposit rates in New Zealand."

Asked if ASB would receive negative media coverage following the rise, McGrath said the bank was the first to lead drops in mortgage rates and it was being consistent in moving the rate back up.

"The market is now entering a new cycle, and we need to ensure our products are priced appropriately based on our underlying costs. With this in mind, we have also increased a number of our deposit rates today, ensuring our savings customers see the benefit," said McGrath.

The variable home lending rate change is effective as from June 18 for new customers and from July 5 for most existing customers. Fixed lending rate changes are effective as from June 18 for all new lending, and deposit rates change on June 25.

- NZHERALD STAFF