STACY SQUIRES / Stuff
Westpac mortgage rates are on the rise.
Westpac has become the second major bank in as many days to dramatically raise home loan rates.
The bank raised rates across all tenors by 44 basis points to 54 basis points.
Its one-year special rate increases by 54 basis points to 5.99% and its two-year special rate by 44 basis points to 6.19%.
Rates for those who do not have at least 20% equity to qualify for the “special” rates range from 6.59% for six-month and one-year terms to 6.89% for five years.
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The move follows ANZ’s announcement on Wednesday to raise its fixed-term mortgage rates.
Westpac also followed ANZ in raising term deposit rates, but both banks raised deposit rates less than their home loan rate increases.
The bank’s term deposit rates for deposits of five months or more increase by 10 basis points or 20 basis points.
Prime Minister Jacinda Ardern said New Zealand’s inflation rate was starting to peak.
Over the past two and a half years, banks have not had to compete to get households to save in their bank accounts, and deposit rates have languished.
Interest rates are expected to rise more than expected because inflation has remained higher than many expected.
Some economists now expect the official exchange rate (OCR) to be raised by 75 basis points in the next revision, and a peak of 5.25%.
SBA economists said borrowers should expect another rate hike.
Senior Economist Chris Tennent-Brown said fixed-term mortgage rates have risen significantly since the start of 2021, and despite the recent decline in some rates, he expects further increases for the rest of the year.
“We believe it is prudent for borrowers to budget for higher mortgage interest rates than they currently are over the next few years.
“We expect most fixed-term mortgage interest rates to peak in the 7% to 7.5% range over the coming year. Floating rates could peak around 9%. However, as is often the case, the outlook is far from certain.
He said higher inflation rates had fueled concerns about how high the OCR might have to go to get inflation under control.
Similar developments have taken place overseas, he said.
“Recession fears have been a counterforce to inflation fears which have driven influential interest rates higher. These concerns have seen some interest rates retreat from earlier highs over the winter, and some mortgage rates have been cut,” he said.
“But the Reserve Bank continues to signal further increases in OCR over the coming year. Mortgage rates are expected to rise from today’s levels as the Reserve Bank continues to raise l ‘OCR.
He said fixing it short and moving to another short had always been a good strategy, but it was prudent for borrowers to expect that strategy to become more expensive.
“Fixing some of the longer terms provides interest rate certainty for the next few years, but at a higher cost than cheaper short-term rates,” he said.
“For those who now want that longer-term interest rate certainty, the cost of fixing for two years or more is still low compared to the average rates of the past 20 years, with durations currently below their respective averages. over 20 years.”
SBA economists still expected interest rates to remain at or below the long-term average of the past 20 years, rather than reaching the higher levels seen before the global financial crisis a year ago. at 14.