5 Jun 2009

ASB raises rate on five-year mortgage

8:24 pm on 5 June 2009

ASB has raised the interest rate on its five-year mortgage to 8% for the first time this year as banks again face rising funding costs.

This has prompted concerns a recovery in the housing market may be doused if other banks raise their lending rates.

Banks worldwide are facing increased competition on money markets from governments faced with rising deficits.

Banks and governments are also facing investor demands for higher interest rates to compensate them for the risk of rising inflation.

Economists expect these factors to push up longer term lending rates to homeowners and businesses.

They say there is little the Reserve Bank can do to quell rate rises when it reviews the Official Cash Rate next Thursday.