28 Oct 2009

Small lenders raise rates

11:51 am on 28 October 2009

More lenders are raising interest rates on fixed-rate mortgages and credit cards.

CBS Canterbury is raising rates on three and five-year loans by as much as 0.25 of a percentage point and Westpac is raising rates on its credit cards by 0.5 of a point next month.

Radio New Zealand's economics correspondent says the increases follow moves to raise rates on fixed term mortgages towards 8% and 9% by most of the big banks a fortnight ago.

Banks are being forced to increase rates as the cost of raising money on the local money market continues to climb.

New rules from the Reserve Bank increasing competition for deposits, are also having an effect.

BNZ says speculation the Reserve Bank will increase the Official Cash Rate earlier than expected is driving up money market rates.

But the bank's economists say these rates could ease if the next review of the Official Cash Rate on Thursday downplays the possibility of earlier rises.

The rate is currently 2.5%, which was set on 30 April.