A second major bank has lifted its fixed-term mortgage rate ahead of this week's official cash rate announcement.

BNZ this morning announced it would increase its three-year fixed home-loan rate by 10 basis points to 4.59 per cent from today.

The increase follows hikes by the ASB on Friday to its three-, four- and five-year fixed-term mortgage rates.

The increases come just a few days ahead of Thursday's official cash rate announcement in which economists are widely expecting the Reserve Bank governor to cut the cash rate to a record low 1.75 per cent, from 2 per cent.

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But instead of cutting rates banks are expected to increase fixed-term mortgage rates on the back of rising borrowing costs.

The BNZ said a wide range of factors were involved in any decision to change interest rates.

"We are pleased that our three-year rate remains very competitive in the market."

The bank said it would not be making further comments on the change.

Yesterday David Tripe, a banking expert with Massey University, said it was no surprise ASB had moved to increase rates as the swap rates - the rates at which bank's borrow on the money market - had jumped significantly in the past three months.

On August 15 the five-year swap rate was 2.08 per cent and on Monday last week it was 2.42 per cent, he said.

The three-year swap rate had risen from 1.98 per cent to 2.23 per cent over the same time.

ASB increased its three-year standard fixed-term rate from 4.89 per cent to 5.09 per cent and lifted its five-year standard rate from 5.29 per cent to 5.49 per cent.

He predicted other major banks may also move this week.

Banks are having to borrow more money on the international market as the growth in local deposits has failed to keep pace with the demand for housing loans.

Instead of putting their money in the bank, savers have ploughed it into the booming property market.

That has left the banks scrambling to attract more deposits.

After the last official cash rate cut in August many of the major banks passed just 5 basis points on to floating-rate mortgage holders, choosing instead to increase deposit rates.

The move is good news for savers who have faced years of low interest rates.