New Zealand banks push fixed-rate mortgage costs higher
In a move mirroring recent shifts by Westpac and ANZ, ASB and BNZ have announced higher fixed-rate home loan terms. The changes affect several common fixed periods, signaling a cautious stance among lenders as they balance funding costs and borrower demand. For borrowers, this means reviewing mortgage terms may be prudent as some rates edge up.
Specific rate changes for fixed terms
BNZ disclosed that it would raise fixed terms by between 19 basis points for an 18-month fix, and 30 basis points for three-, four-, and five-year fixes. ASB has signaled similar adjustments, aligning with the broader trend across major banks in New Zealand’s mortgage market. The exact bank-by-bank adjustments can vary, but the direction is clear: longer fixed periods are becoming more expensive.
Why banks are shifting fixed rates
Mortgage lenders cite several factors behind the uptick in fixed rates. These include higher funding costs, shifting expectations for the official cash rate, and a need to manage risk amid changing economic conditions. By lifting fixed rates, banks aim to stabilize their funding costs over the period of the loan, even as shorter-term rates may remain relatively stable.
Implications for borrowers
For households and property buyers, the rate increases can affect monthly repayments and overall household budgets. Those currently on variable or floating rates may see rate options shift if they consider refinancing or purchasing a new property. Financial advisers often recommend evaluating whether locking in a fixed rate remains advantageous given individual risk tolerance, expected income stability, and the planned duration of the loan.
How to navigate the changing landscape
Participants in the mortgage market should take a measured approach:
- Review loan terms: Compare fixed-rate offers across major lenders to identify the best combinations of rate, term, and fees.
- Consider the loan horizon: If you anticipate staying in your home for many years, a longer fixed term can provide predictability, even at a higher rate.
- Run the numbers: Use affordability tools to assess how a rate change affects monthly repayments and total interest over the life of the loan.
- Consult a broker or bank advisor: A qualified professional can help map out scenarios tailored to your financial situation.
What this means for the NZ housing market
With multiple banks raising fixed-term rates, buyers may pause or slow their pace, particularly for longer-term loans. This could influence housing demand and, by extension, property price dynamics in the near term. However, fixed-rate changes are just one piece of a broader economic picture, with factors such as wage growth, inflation, and employment trends also shaping market activity.
Bottom line
ASB and BNZ’s latest fixed-rate adjustments, following similar moves by Westpac and ANZ, underscore a tighter rate environment for longer fixed terms. Borrowers should revisit their mortgage strategy, compare offers, and consider the most suitable rate structure for their financial goals in the coming months.
