Kiwibank lifts short-term home loan rates as pressure builds on homeowners

Kiwibank is the latest major lender to lift some of its short-term fixed home loan rates a little over a week away from the next official cash rate decision.

It comes as the banking sector faces criticism over its record-breaking profits and homeowners feel the pain of higher interest rates and living costs.

From today, the New Zealand-owned bank is increasing its six-month special rate to 7.39 per cent (from 7.25 per cent) and its standard rate to 8.39 per cent (from 8.25 per cent).

The one-year fixed special will move to 7.35 per cent, up from 7.25 per cent, while the one-year standard will jump from 8.25 per cent to 8.35 per cent.

However, the official cash rate (OCR) has been on hold at 5.5 per cent since its last increase on May 24.

Banks have blamed rising wholesale swap rates for the need to increase home loan rates. Swap rates are used by banks and larger institutions to manage interest rate risk by locking in a fixed interest rate for a specific period and they give a guide to the cost of borrowing for these institutions.

But in the past month, wholesale interest rates have fallen sharply. Despite that, a Kiwibank spokeswoman said its cost of funds had increased.

“We regularly review our interest rates to ensure they are competitive and reflect current market conditions. While the OCR has not moved [recently], our cost of funds has increased.

“We would invite any of our customers who are worried to get in touch with us to discuss their circumstances and how we can help with their finances as soon as possible.”

Last week BNZ bumped up its one-year, 18-month and two-year fixed “classic” and standard home loan rates.

The bank’s one-year classic and standard rates increased for the second time in as many months.

Its one-year classic rate increased 10 basis points to 7.35 per cent (on top of October’s hike from 7.19 per cent to 7.25 per cent), while the standard rate hit 7.95 per cent, having been lifted to 7.85 per cent only a month earlier.

This month BNZ reported its net profit after tax rose by 6.7 per cent in the year to September to $1.5 billion, helped by rising mortgage rates.

And in August Kiwibank made a record profit, lifting its after-tax profit by 34 per cent to $175 million, beating its previous record a year earlier of $131m.

The Reserve Bank will publish its quarterly Monetary Policy Statement (MPS) on Wednesday next week along with its decision to hold, hike or cut the official cash rate.