Interest rates rising; more on the way

Major banks have raised some fixed-interest loan rates, and one finance commentator is warning of more increases to come.

The ANZ-National Bank yesterday became the latest announcing increases in longer-term fixed interest rates for mortgages and business loans - blaming competition for savings for putting upward pressure on the lending rates.

Its three-year rate has risen from 5.99% to 6.15%; the four-year rate from 6.40% to 6.55%; and the five-year rate from 6.50% to 6.75%.

Kiwibank has also lifted its five-year fixed rate by 26 basis points to 6.75%, effective this morning, but spokesman Bruce Thompson said no further increases had been planned.

Westpac increased its fixed-term home loan rates on Friday, pushing the three-year rate up 16 basis points to 6.15%, the four-year up 15 points to 6.55%, and the five-year up 25 basis points to 6.75%.

ASB increased its rates on March 13, with the three-year fixed rate up from 6.05% to 6.15%, the four-year up from 6.40% to 6.55%, and the five-year up from 6.65% to 6.75%.

As of Saturday, BNZ has raised its standard fixed-interest housing rates from 6.39% to 6.49% for four years, 6.49% to 6.69% for five years, and 6.79% to 7.20% for seven years.

But a spokesperson said rates were still at "a historic low".

Finance commentator Bernard Hickey, of interest.co.nz, said there was a lot of competition within New Zealand for cash deposits, and banks were also finding it harder to raise money offshore cheaply.

"They haven't been able to raise any long-term money in the last four months ... International investors are not keen on New Zealand while there's this uncertainty about its international credit rating hanging over its head."

Credit rating agency Standard and Poors has signalled it might downgrade New Zealand's credit rating.

David Tripe, director of Massey University's Centre for Banking Studies, said lenders also expected an economic recovery in the coming years, and the increases would help bring longer-term rates into line with short-term lending rates, which would be "rather higher".

Mr Hickey predicted more rises in the fixed-loan rates.

"Central banks around the world are printing money hand over fist, which is going to drive inflation through the global economy, and when you have inflation rising, long-term interest rates rise too."

 

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