The announcements follow the RBNZ’s easing of monetary stimulus settings
ASB has announced increases on its fixed term mortgage rates and term deposits, saying that New Zealand’s economic outlook is looking “robust” enough for interest rates to begin to rise.
Kiwibank, meanwhile, has also lifted its term deposit rate to 1.2% for its 200-day term - an increase from 0.8%.
All of ASB’s fixed term rates from six months to five years are increasing by 0.30%, with its one-year and two-year fixed terms increasing by 0.36%. ASB executive general manager of retail banking Craig Sims said that although interest rates have started to rise, they are still at very low levels by historical standards.
Read more: RBNZ releases Monetary Policy Review and OCR decision
“We are mindful that some first home buyers in particular have only ever experienced the current low-rate environment,” Sims said.
“When we assess a home loan application, we use a ‘test rate’ that is substantially higher than current mortgage rates to give customers the confidence they can continue to make payments if rates increase.”
“We encourage home lending customers to talk to us about their options, which could include spreading mortgage amounts over different terms to give certainty over time or making extra payments while rates are very low,” he explained.
“Whatever the market conditions, our focus is squarely on offering customers market-leading home lending products and leading customer experiences.”
ASB’s Housing, Orbit and Back My Build variable rates have all remained unchanged, and Sims said ASB is committed to helping customers with a range of budgeting and calculation tools.
The rate rises have come alongside the Reserve Bank’s announcement that it will be easing its monetary stimulus measures, and ASB is now predicting an OCR hike in August rather than November.
Read more: Have we reached the end of “historically low” mortgage rates?
“Imminent OCR increases are based also on events going smoothly over the coming months, but uncertainties remain huge,” chief economist Nick Tuffley said. “New Zealand is still vulnerable through having only a small portion of the population vaccinated. A lot can go wrong, even as New Zealand’s economy has hit growing pains so quickly.”
“Gingerly removing some of the stimulus soon does seem to be the path of least regret,” he added. “Particularly as low interest rates have already played a strong role in boosting the economy back up and contributed to an overheating housing market in the process.”
