3 Aug 2011

Bank raises rates on big range of fixed term mortgages

9:59 pm on 3 August 2011

ASB has become the first of the major banks in New Zealand to raise rates across most of its fixed mortgage products.

The bank has raised rates for one-year, 18-month, two, three, four and five-year mortgages by between five and 40 basis points.

ASB's move comes after Westpac and Kiwibank earlier this week raised rates across a narrower range of mortgage products.

The banks are responding to increases in their own borrowing costs which shot up after the Reserve Bank signalled last week that the Official Cash Rate will rise soon.

Financial markets interpreted that as meaning the benchmark interest rate will rise by half a percentage point in September.

That could lead to increases in floating mortgage rates and a switch by many from floating to fixed.

It has had the effect of pushing up money market rates now as banks borrow more in anticipation of homeowners rushing to fix rates.