Westpac Chief Economist Kelly Eckhol explains the bank's decision to increase interest rates despite OCR cuts.
Two more major banks have raised their longer-term home loan and term deposit rates while dropping their six-month fixed rates, with higher wholesale rate movements driving the changes.
ASB and BNZ announced changes to their fixed home loan rates this morning, weeks after the Reserve Bank cut the official cashrate (OCR) by 25-basis points (bp) to 2.25% for the final time this year.
The changes would lift long-term mortgage rates by as much as 30bps.
For ASB, its two-year rate would jump from 4.49% to 4.75% – a change of 26bps – while its three year-rate would increase from 4.79% to 5.09%.
The bank’s four- and five-year rates are both being raised by 30bps to 5.39% and 5.45% respectively.
ASB general manager Adam Boyd said higher wholesale costs have led to an increase in home loan rates on some terms.
“While today’s adjustments reflect the reality of higher funding costs, the change in market conditions is good news for some of our savers, with term deposit rates increasing by up to 35 basis points.”
Neither bank changed its one-year fixed term rates, continuing the trend in the wider banking sector.
Reserve Bank Governor Dr Anna Breman has made an effort to dispel market reactions to the bank's November 26 Monetary Policy Statement. Photo / Mark Mitchell
Last week, the Co-operative Bank became the second major bank to both increase its long-term home loan and term deposit rates and drop its shorter-term rates.
ANZ was the last bank to do so, lifting several mortgage and term deposit rates on Monday by up to 30bps while cutting its six-month rate by 10bps.
Breman, speaking to the Herald this week, stressed that the Reserve Bank’s November 26 Monetary Policy Statement for the year ahead “still holds”.
“I think there is a risk that if mortgage rates rise quickly, that households will see that and be more cautious than maybe they need to be,” she said.
“I think it is important that we see a healthy [economic] recovery now and also that that recovery lasts. It’s been three years of very weak growth and we’re just about to get out of that.”
