ASB follows BNZ to signal variable home loan rate rise

Thursday, 14 July 2022

ASB will lift its floating rate loan interest rate, but is also increasing some deposit rates.

ASB has become the second bank to signal an increase in the cost of its variable rate home loans.

The bank said it would lift the interest rate it charged on its ordinary variable rate loan from 5.85% to 6.35% on July 27.

It would also increase the cost of its revolving credit Orbit home loan rate from 5.95% to 6.45%.

Earlier on Thursday, Bank of New Zealand (BNZ) announced it would increase the rate on its variable rate home loan.

* Is this the new normal? Bank lifts home loan rates near 7 per cent

Homes used to cost a lot less, but in previous decades home loan interest rates were much higher. Home loans rates are however on the rise as the Reserve Bank Te Pūtea Matua has been raising the official cash rate to fight inflation.

* Kiwibank and BNZ follow other major banks in lifting home loan rates

The Reserve Bank Te Pūtea Matua increased the official cash rate (OCR) from 2% to 2.5% on Wednesday in a bid to combat rampant inflation.

Some bank economists are forecasting inflation to peak at just over 7%.

Bank of New Zealand is to lift its variable rate home loan interest rate.

The Reserve Bank said it was “resolute in its commitment to ensure consumer price inflation returns to within the 1% to 3% target range”.

The increase was the third time this year that the central bank has raised the OCR by 50 basis points with its current forecasts projecting that the rate is likely to peak at 4% during the second half of next year.

BNZ said it would increase the interest rate it charged on its variable rate home loan for people with 20% or more equity in their homes to 6.39% on August 1.

Its current variable rate is 5.94%, though people with lower levels of equity in their homes pay a “low equity” premium of between 0.35 to 1.15 basis points on top.

BNZ did not signal a rise in the interest it charges on any of its fixed rate loans, or its credit card or overdraft rates.

Both ASB and BNZ are lifting some deposit rates.

BNZ said it would lift the interest on its Rapid Save accounts to 1.8% on July 29. It’s current Rapid Save rate is 1.3%.

ASB said it had lifted the maximum interest rate on ASB’s Savings Plus deposit account from 1.25% to 1.75%, and would backdate that to July 1.

The bank also announced increases to term deposit rates, with its 18-month term rate to increase to 4% on July 15.