Overview: Fixed-rate hikes from ASB and BNZ
New Zealand’s home loan market has seen another wave of rate adjustments as ASB and BNZ join Westpac and ANZ in lifting some fixed-rate terms. The moves come amid broader shifts in the interest-rate landscape, affecting borrowers who prefer the predictability of fixed-rate mortgages.
What exactly is changing?
According to BNZ, fixed-rate terms are rising by different margins depending on the term length: an 18-month fix is up by 19 basis points, while three-, four-, and five-year fixes see increases of about 30 basis points. ASB has signaled similar direction, aligning with peers in the banking sector in tightening fixed-rate pricing. While these adjustments may seem modest on paper, they can meaningfully affect monthly payments and long-term borrowing costs if you are currently in or considering a fixed-rate loan.
Why banks are changing fixed rates
Fixed-rate lending is influenced by several factors, including wholesale funding costs, anticipated inflation, and policy expectations from the Reserve Bank of New Zealand. When wholesale rates rise or when banks see higher risk premia for longer terms, fixed-rate quotes tend to move higher. For borrowers, this means the cost of locking in a rate for several years could be higher than before, potentially prompting some to rethink their strategy.
What this means for borrowers
For homeowners already on fixed terms, the immediate impact is limited to new loans or renewals. If you’re nearing the end of a fixed period, you’ll likely be offered a new fixed rate, which may be higher than your current one. It’s important to compare these offers against variable-rate options and explore whether refinancing to a shorter or longer fixed term could produce savings over your selected horizon.
Short-term and long-term considerations
– Short-term cash flow: A higher fixed rate can increase monthly repayments. Budgeting becomes crucial as you approach renewal.
– Planning ahead: If you expect rate rises to continue, you might lock in a longer-term fixed rate to secure predictability, though this often comes with a higher rate today.
– Refinance opportunities: It may be worth evaluating whether switching lenders or negotiating a better deal with your current bank could offset higher rates.
Market context: how it compares with peers
ASB and BNZ are not alone in adjusting fixed-rate pricing. The broader market, including rivals Westpac and ANZ, has exhibited a similar trend, signaling a cautious stance from banks amid evolving economic indicators. For borrowers, this underscores the value of ongoing rate tracking and shopping around for the best fixed-term deal available at renewal time.
Tips for borrowers navigating rising fixed rates
– Review your current loan: Check when your fixed-rate term ends and what the penalty structure looks like if you break early.
– Run numbers for different terms: Compare the total interest payable over 1, 2, 3, 4, and 5-year horizons to see what fits your financial plan.
– Consider split fixes: If a fully fixed term feels too costly, a split-rate approach (part fixed, part variable) can balance predictability with potential rate savings.
– Seek professional advice: A mortgage adviser can help model scenarios tailored to your income, goals, and risk tolerance.
Bottom line
The recent rate moves from ASB and BNZ reflect a shifting environment for fixed-rate home loans in New Zealand. While higher fixed-term rates may affect renewal costs, proactive planning, careful comparison, and strategic selection of terms can still help borrowers manage costs effectively over the life of their loan.
