Major NZ banks have hiked their fixed mortgage rates over the past week
Major banks ANZ, ASB, and Kiwibank have increased their fixed mortgage rates over the past week amid high inflation forecasts, and one expert said rates might have already peaked in New Zealand.
Read more: Kiwibank hikes home loan rates near 7%
From the 3.78% average five-year mortgage rate being taken out by borrowers in March last year, this has risen to 5.47% in February 2022.
Higher inflation expectations across the world are pushing up funding costs for banks, which banks, in turn, are passing on to borrowers. But Frances Sweetman, Milford Asset Management senior investment analyst, said mortgage rates should start to stabilise now – especially longer-term fixed rates, Newshub reported.
“I think… we've seen them peak now or, at least, we should be around the peak,” Sweetman said, but added that it could always change – depending on the global inflation situation.
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“We have seen particularly big increases in the last month or two, in those market interest rates… that's because we've seen the Russia-Ukraine war that's seen all prices rise, we've seen employment remain incredibly strong, we've seen local inflation data that's been incredibly strong,” Sweetman told AM.
Sweetman said what happens next will depend on how fast the economy slows in response to higher interest rates and how the Reserve Bank responds. RBNZ lifted the OCR from 0.75% to 1% last month and will announce next week whether it will increase again.
Sweetman said it was due to high inflation driving fast interest rate rises that markets were pricing flat interest rates between two and three years ahead of time, aimed at cooling the economy, so rates won’t have to rise for a long period.
“Particularly for those longer-dated interest rates – we should start to see… the RBNZ bring the official cash rate back down in those later years and that should mean that those mortgage rates, if anything, have the ability to fall rather than rise much further,” she told AM.
RBNZ forecasts showed the OCR will lift to between 3% and 3.5% towards the end of 2024, Newshub reported.
