Major banks have started increasing their fixed mortgage rates.
This is despite the Reserve Bank holding the interest-driving official cash rate (OCR) at the historic low of 2.5% last week.
With the cost of long-term funds to the banks expected to continue increasing, Massey University's Dr David Tripe, director of the centre for banking studies, predicts all major banks will have followed suit by the end of the month.
Economists were last week saying floating mortgage holders should now consider moving to fixed rates before the Reserve Bank begins raising the OCR.
This is part of the reason the long-term funds to banks are already becoming more expensive.
Dr Tripe said two-year swap rates for banks had, since July 11, risen from 3.36% to 3.71% at August 1.
Three-year swaps went from 3.79% to 4.03% during the same period.
"This [mortgage rate shift] is not a complete surprise, as the costs to banks of longer-term funds has gone up," Dr Tripe said when contacted yesterday.
ASB, a division of the Commonwealth Bank of Australia, raised its fixed-term mortgages by between five and 40 basis points yesterday, after Westpac's move the day before with its 26-point hike.
Reserve Bank Governor Alan Bollard was, last week, faced with the dilemma of raising the OCR to quell 21-year record inflation levels above 5%, at a time the New Zealand dollar is at a 30-year record high against the US dollar, which is already killing exporters' margins.
Predictably, Dr Bollard held the OCR at 2.5%.
But he signalled a rate cut of 50 basis points which followed the February earthquake in Christchurch would not remain in place much longer.
Most economists are now saying OCR rates will increase by September.
ASB's one-year fixed rate was now 6.15%, the 18-month rate 6.40%, two-year rate 6.65%, three-year rate 6.95%, four-year rate 7.35%, and the five-year rate 7.75%, NZPA reported.
Westpac increased its six-month mortgage lending rate by 26 basis points to 5.85% and its one-year capped rate by 25 basis points to 6.75%.
