BNZ raises longer term fixed mortgage rates (Update 1)

BNZ has raised its fixed mortgage rates in a move that brings the bank's 18 month to five year rates to the top of the range offered by New Zealand banks. (Update 1 includes PSIS move.) BNZ raised its two-five year Standard & Fly Buys mortgage rates by 30 basis points each. Its new two year rate is 6.8%; three year 7.75%; four year 8.25%; and five year 8.6%. BNZ also raised its Classic 18 month rate by 20 bps to 6.29%. It raised its standard seven year fixed rate by 9 bps to 8.99%. BNZ's fixed Global Plus rates are 10 bps higher than its standard rates. See and compare all mortgage rates on our mortgage rates page. While variable and short term fixed mortgage rates have generally fallen below the 6% mark in recent weeks (although ANZ National is still offering a 6.45% variable rate), longer term fixed rates have begun to rise again as borrowers look to fix after a period on cheaper short term rates. Banks are increasingly raising their longer term fixed rates and nudging their variable rates lower. Banks face higher local term deposit rates as the Reserve Bank has directed them to borrow more locally and for longer terms. Also, many borrowers have rushed to fix at longer terms, ironically pushing up wholesale rates as banks also jump into wholesale markets to raise the funds and hedge them.

Yesterday, Westpac economists noted that fixed rates were unlikely to remain at current levels "once we see a more substantial shift by borrowers into these terms - in the same way that the extremely low long-term rates available prior to March didn't last for long once borrowers actually started taking them up". "Borrowers should seriously consider fixing now, bearing in mind that they can reduce uncertainty about future cash flows by choosing a lower interest rate today and repaying more than the minimum amount," they said. Later on Tuesday PSIS raised its two year mortgage rate by 15 bps to 6.5%.