ASB's Sovereign moves rates first

In the first move by a bank since the Official Cash Rate was lifted last Thursday, ASB's Sovereign has hiked its floating mortgage rate in line with the Reserve Bank's move of 25 bps. It raised its floating rate to 6.35%.

But it has followed a move lower in longer term wholesale interest rate markets by cutting its 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% from just 12% three years ago. That 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% and left its one year rate unchanged at 6.6%.

But it cut its 18 month mortgage rate by 15 basis points to 6.75% from 6.9%. Sovereign cut its 2 year rate to 7% from 7.1% and cut its 3 year rate by 5 basis points to 7.35%.

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

ASB is widely expected to follow in the size of its moves. http://www.interest.co.nz/borrowing/mortgages
ASB was also the first to move after the Reserve Bank hiked the OCR on June 10 from 2.5% to 2.75%. The OCR was lifted to 3% last Thursday.

However, ANZ-National was the first to move in late 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%. It also raised its one and two year rates, but cut its 3 year rate to 7.1%

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

www.interest.co.nz