Mortgage pain: Second major bank increases home loan rates after OCR announcement

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Westpac has lifted both its fixed and floating home loan interest rates in response to the Reserve Bank of New Zealand (RBNZ) hiking the Official Cash Rate (OCR) yesterday.

Westpac’s standard six-month and one-year rates will increase 20 basis points to 7.69 per cent and 7.59 per cent respectively, effective today.

Its three-year rate will increase 10bp to 6.69 per cent. However, its two-year rate will drop 14bp to 7.05 per cent.

The move comes despite RBNZ Governor Adrian Orr saying at a press conference yesterday following the OCR announcement that he didn’t expect to see any movement in fixed mortgage rates.

“We anticipate none, in the sense that what we are doing today is what we’re foreshadowing for some time,” he said.

The RBNZ’s 25bp increase to the OCR to 5.5 per cent was largely expected, but the central bank surprised the market by saying it would stop at 5.5 per cent.

Core Logic NZ’s chief property economist Kelvin Davidson also said yesterday he would be very surprised to see short-term mortgage rates change much, if at all, as a direct response to the OCR shift itself, as this has largely been priced in.

Westpac’s floating rate will increase 25bp to 8.64 per cent from June 1 for new customers and June 15 for existing customers.

Sarah Hearn, Westpac general manager of product, sustainability and marketing, said the changes were driven by movements in wholesale rates and the OCR announcement.

“The OCR has increased 25bp and as a result, we’re lifting interest rates on some of our variable lending and savings products,” she said.

“Separately, we’ve seen an overall rise in wholesale interest rates over the past month. These are the rates we pay when obtaining funding to support borrowers with fixed-term lending.

“As a result, we are now lifting some of the interest rates on our fixed home loans and term deposits.”

Hearn said while most households were coping well with the higher interest rates, some borrowers will be feeling the strain.

“We are writing to all customers on fixed-term home loans that are approaching expiry to let them know their options. We’re also telephoning customers who may be in need of extra support,” she said.

“It’s really important that anyone who is feeling financial stress comes and talks to our experienced team early so we can discuss their options.”

The bank also made changes to its term investment rates. Its five, six and nine-month rates have all been bumped up 20bp.

Orr yesterday didn’t stray from his message that he would still like to see bank deposit rates rise.

Westpac is the second major bank to make changes to its home loan rates since the OCR announcement.

Yesterday, ASB said its housing variable rate would move from 8.39 per cent to 8.64 per cent, while the Orbit home loan rate would increase from 8.49 per cent to 8.74 per cent.