12 Aug 2009

Longer term mortgage rates on the rise again

6:09 pm on 12 August 2009

Longer term mortgage rates are rising again and an observer says they will continue to do so.

Major banks, with the exception of KiwiBank and BNZ, have increased their rates in recent days.

Massey University senior banking lecturer Claire Matthews says more mortgage holders will probably take up fixed rates before they rise again.

But she says that would place greater pressure on the amount of funds banks have to lend.

Mrs Matthews says it has also become harder for banks to acquire funds overseas and longer term rates could therefore continue to rise, reaching 9% or 10% by late next year.

ASB chief economist Nick Tuffley says banks are competing for funds with governments who are financing rescue packages.

Mr Tuffley it is likely longer term rates will drift up in the next few months in response to global pressures.

He says short term rates probably will not be affected until the Reserve Bank decides to lift the Official Cash Rate, which could be the middle or end of next year. It is currently 2.5%.