Mortgage rates rise - more to come

The news is bad for homeowners, with several major banks lifting their fixed-rate mortgages.

Other lenders are also expected to increase their rates as the economy remains stronger than expected and international pressures tighten. The BNZ is predicting a "creeping up" of fixed rates in coming weeks.

The increases will suck money out of consumers' wallets - on top of their extra spending on rapidly rising petrol prices.

Bank lending managers were this week warning customers of the imminent rises if they were due for an interest rate review.

Several home-owners spoken to by the Weekend Herald said their lenders - ASB Bank and the National Bank - had urged them to complete their reviews by yesterday to avoid higher rates applying from today or Monday.

The interest.co.nz website, one of several that tracks home mortgage rates, yesterday listed six banks which had increased their fixed rates this week or would lift them by Monday.

The rises vary, ranging from around 0.05 to 0.3 percentage points.

The ANZ did not return the Herald's calls, but commentator and publisher David Chaston, of interest.co.nz, said the bank had increased its two-year rate to 7.95 per cent from 7.75 per cent.

A spokesman for Kiwibank - which had not announced rises this week - said there was pressure for an increase in its three-year fixed rate.

More than 80 per cent of home mortgages are on fixed interest rates.

The increases came in the week that Reserve Bank Governor Alan Bollard announced there would be no change in the 7.25 per cent official cash rate - which underpins floating home mortgage rates, sitting at 9.55 per cent for the major banks - and that the rate was unlikely to be cut this year.

Interest-rate watchers disagree over the effect that banks' expectations for the official cash rate have for fixed-rate loans, but they agree that international wholesale money prices are a key factor.

The BNZ, which announced fixed-rate increases this week, said on Thursday in its weekly overview, by chief economist Tony Alexander, that the two-year swap rate, at which banks borrowed for lending on two-year fixed-rates mortgages, had increased to 7.01 per cent from 6.78 per cent four weeks ago.

"Fixed [home] rates peaked last December," Mr Alexander said last night. "Since the start of this year the rates have tracked on down to their current levels. The decline over the past four months has reflected mainly the signs of weakness in the New Zealand economy and the markets factoring in expectations of the Reserve Bank easing policy this year.

"But over the past two to three weeks the [economic] data have tended to be on the firm side and the markets have pulled back from expecting the Reserve Bank to ease any time soon.

"That has caused some of those wholesale fixed borrowing costs to creep back up again."