Homeowners are rushing to fix their mortgage interest rates
after the second cash rate increase in as many months.
New Zealand's five biggest banks - BNZ, Westpac, ANZ,
Kiwibank and ASB - report a "significant" lift in fixed
mortgage deals since the OCR hike in March.
Further rises are likely after Reserve Bank Governor Graeme
Wheeler lifted the OCR 25 basis points to 3 per cent on
In recent years about 75 per cent of homeowners have opted
for floating mortgages because of low interest rates. But
figures show, on average, Kiwi banks now have about 61 per
cent of residential borrowers on fixed deals and just 39 per
cent on floating deals. The last time that happened was in
The ASB and Kiwibank report their mortgage ratios recently
flipped to 65 per cent of residential customers on fixed
deals and 35 per cent on floating deals, a reversal from just
two years ago.
"Following the latest OCR rise, we expect the figure to
increase to 70 per cent of people opting for fixed rates,"
Bruce Thompson, Kiwibank communications manager, said. "We
anticipate people will digest the latest OCR rates and many
will then decide to fix rather than float, or have a
combination of both to give them a level of certainty about
The most popular fixed-rate deals are for mortgages of
between two and four years, Thompson said.
However, mortgage broker John Bolton, of Squirrel, urged
people not to panic. "People rush to fix because they fear
interest rates will suddenly soar and they won't be able to
pay the mortgage if on a variable rate," he said.
"The last time we had an OCR of 4.75 per cent was in 2003 and
the housing rate then stayed at just under 6 per cent, so I
don't see mortgage rates suddenly leaping to 8 per cent or
Current floating rates are between 5.74 per cent and 6.25 per
cent. Rates for two-year fixed deals range from 6.19 to 6.49
Campbell Hastie from Auckland-based first-home buyer
specialists Go2Guys warned people to shop around before
"Clients realise they cannot avoid the impact of rising
rates," he said.
"However, they can manage the impact. A useful way of doing
this is to split their lending into two or more pieces, with
each piece on a different fixed term. This way the impact of
rising rates is spread, often with a 12-month gap between
giving time to adjust."
- Russell Blackstock of the Herald on Sunday