ASB follows BNZ in signaling a hike in the variable mortgage rate
Kirk Hargreaves / Stuff
ASB will increase its interest rate on variable rate loans, but is also increasing some deposit rates.
ASB has become the second bank to report an increase in the cost of its variable rate mortgages.
The bank announced that it would raise 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 Orbit revolving credit mortgage rate from 5.95% to 6.45%.
Earlier on Thursday, the Bank of New Zealand (BNZ) announced that it would raise the rate on its variable rate mortgage.
* Bank of New Zealand raises mortgage rates
* Is this the new normal? Bank raises mortgage rates to almost 7%
* Kiwibank and BNZ are following other major banks in raising home loan rates
The Reserve Bank Te Pūtea Matua on Wednesday raised the official exchange rate (OCR) from 2% to 2.5% in a bid to combat runaway inflation.
Some banking economists expect inflation to peak at just over 7%.
The Reserve Bank said it was “committed to its commitment to ensuring that consumer price inflation returns to the target range of 1% to 3%.”
Houses cost much less, but in previous decades mortgage interest rates were much higher. Mortgage rates, however, are on the rise as the Reserve Bank Te Pūtea Matua raised the official cash rate to fight inflation.
The increase was the third time this year that the central bank has raised the OCR by 50 basis points, with its current forecast calling for the rate to peak at 4% in the second half of next year.
BNZ has announced that it will increase the interest rate it charges 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%, although people with lower levels of home equity pay a “low equity” premium of between 0.35 and 1.15 basis points more.
BNZ has not reported an increase in the interest it charges on any of its fixed-rate loans, or on its credit cards or overdraft rates.
ASB and BNZ are both raising deposit rates.
BNZ announced that it would raise interest on its Rapid Save accounts to 1.8% on July 29. Its current Rapid Save rate is 1.3%.
ASB said it had raised 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 term deposit rate hikes, with its 18-month rate rising to 4% on July 15.