BNZ, Westpac to raise floating home loan rates

Kiwibank, ANZ, and ASB all announced increases prior to the move

By Mina Martin

24 Aug 2022

Bank of New Zealand and Westpac have both announced that they will raise the cost of their floating-rate loans, while leaving their fixed-term home loan rates unchanged.

Prior to BNZ and Westpac’s move, Kiwibank, ANZ, and ASB all announced increases to floating home loan rates, following the Reserve Bank’s decision to hike the OCR from 2.5% to 3% last week.

Read more: ANZ, Kiwibank raise interest rates

BNZ will lift the rate on its floating rate loans from 6.39% to 6.79% starting Sept. 9; while Westpac will increase its variable home loan rate by 46 basis points to 6.85%, Stuff reported.

Increasing home loan rates as well as the even higher “test” rates banks use to calculate whether people can afford loans they are applying for, had impacted house prices as buyers were able to borrow less.

After last week’s OCR hike, RBNZ forecasted house prices could drop by up to 20% from their peak.

It was likely that the central bank would continue to lift the cash rate to bring down inflation, with the OCR tipped to rise to 4% next year and remain at that level until late the following year.

According to Westpac economists, rising interest rates will cost the average household an additional $3,000 a year, Stuff reported.

The sharp rise in interest rates over the past year resulted in the increase in one-year home loan rates from about 2% to 5%.

Westpac economists, in their latest Economic Overview, said that this would significantly impact households – some of which were yet to have their cheap fixed terms expire.

Meanwhile, the past year also saw food surge 7% and petrol spike by 33%.

In the bank’s latest Economic Overview, Westpac economist Michael Gordon, said: “Those cost increases are being felt by every family across the country and the pressure on household budgets has been more intense for those households on lower incomes, who tend to spend a larger share of their earnings on necessities,” Stuff reported.