ASB, ANZ raises variable home loan and deposit rates for the first time after increasing OCR

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November 24, 2021 The Reserve Bank today increased the official cash rate by 0.25 percent to 0.75 percent. This 25 basis point increase was the first for the RBNZ in seven years.

ANZ Bank followed ASB as the first major bank to increase variable mortgage rates for residential properties after the Reserve Bank announced it would raise the official cash rate from 0.5 percent to 0.75 percent today.

ASB said it decided to pass 0.15 percent and increase its variable home loan rate from 4.45 percent to 4.6 percent and its rotating rate from 4.55 percent to 4.7 percent.

A special tariff for new buildings called Back my Build would also rise from 2.04 percent to 2.29 percent.

ANZ followed suit shortly afterwards, saying it would raise interest rates on its floating and flexible home loans by 0.20 percent. The bank announced that interest rates on a number of savings and daily accounts will also rise.

Craig Sims, executive general manager of retail banking at ASB, said the bank held back on increasing its floating rates following the October OCR hike, but today’s hike will be partially passed on to customers due to changing market conditions.

The new floating rate would apply to new loans from December 1 and apply to existing loans from December 8.

In October, the ASB pledged not to pass OCR increases on its business base rate for the remainder of 2021, in recognition of the difficult trading conditions many small business owners are currently facing.

In some good news for savers, the bank said it would also raise the deposit rates on its Savings Plus and Headstart accounts by 0.25 percent and raise the maximum rate to 0.65 percent.

The increase for the Headstart accounts will apply from December 1, while customers with the Spar-Plus accounts will have to wait until January 1, 2022.

Ben Kelleher, ANZ managing director for personal banking, said the economic conditions that supported historically low interest rates have changed and the RBNZ was one of the first central banks to tighten monetary policy since the pandemic began in the face of inflation started.

“We have been encouraging our customers for some time to take advantage of the low interest rate environment and pay off as much of their debts as possible,” said Kelleher.

“We have seen a continued increase in fixed-rate mortgages, roughly 90 percent of our fixed-rate home loan balances.”

Reserve Bank’s projections show it will raise the cash rate to a high of around 2.5 percent by the end of 2023.

CoreLogic chief economist Kelvin Davidson said the implications for the housing market are clear – mortgage rates for fathers are coming.

“With most short-term fixed rates now climbing towards (or above) 4 percent, we’ve already pretty much doubled from previous lows, and numbers of 5 percent or more wouldn’t be a surprise.” also in the next 6-12 months. “

While this was still low by previous standards, Davidson said that many borrowers with rolling one-year terms could see a significant shift in mortgage costs.

He cited data from the Reserve Bank, which showed that $ 227.8 billion in mortgages are either floating or due to be renewed next year.

“That’s 71 percent of all lending – a lot of funding that, if refixed, is likely to result in higher mortgage repayments and, as a result, lower disposable income.”

But at least one real estate company argues that the rate hike will not diminish the enthusiasm of tenants willing to buy.

Tim Kearins, owner of Century 21 New Zealand, said it was because the first home buyers to pay a mortgage stayed comparable to or cheaper than paying record rents.

“People wake up to the fact that they can either buy and set their interest rate at 4.5 percent or wait and pay 6 percent – that’s 33.3 percent more.”

Kearins said rents rose as demand stayed high and supply declined.

“Real estate prices are also continuing to rise. But at least we are now seeing many more townhouses on the market that offer first-time buyers a relatively cheap entry point.”

He said his agency saw a sharp surge in listings when the Covid-19 restrictions were lifted.

“This recent hike by the Reserve Bank isn’t going to stop kiwis from buying property and getting some good, fixed interest rates. Home ownership remains called a safe long term bet.

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