ANZ Bank has lifted its mortgage rates in response to the Reserve Bank hiking the official cash rate.
ANZ announced its floating and flexible home loan interest rates will go up 0.5 per cent to 5.54 per cent and 5.65 per cent (per annum) respectively.
Business floating and business overdraft base rates will also go up 0.5 per cent.
Earlier this afternoon the Reserve Bank lifted the OCR by 50 basis points - a double rate hike - to 1.5 per cent.
Ben Kelleher, ANZ managing director for personal banking, said the OCR was only one of a number of factors, including wholesale interest rates, that determined bank lending rates.
"The global economic response to Covid-19 and geo-political issues, like the war in Ukraine, are driving inflation to levels not experienced in decades."
"Alongside the OCR move today we have seen significant increases in wholesale interest rates in recent weeks. This also has an impact on our fixed interest rates for home loans," Kelleher said.
Kelleher urged any customers who had concerns, or who wanted to take the opportunity to talk about their finances, to contact the bank.
"For people who haven't experienced rising interest rates it can be daunting, particularly homeowners who are rolling off low fixed rates when floating and fixed rates are now higher," he said.
Homeowners should brace for higher mortgage rates sooner as the Reserve Bank signals it is prepared to move faster to head off inflation.
In announcing the rate hike, the monetary policy committee said it "remained comfortable" with the outlook for the OCR as outlined in their February Monetary Policy Statement.
They agreed that moving the OCR to a more neutral stance sooner will reduce the risks of rising inflation expectations.
"A larger move now also provides more policy flexibility ahead in light of the highly uncertain global economic environment," the committee said in its statement.
The committee noted that annual consumer price inflation was expected to peak around 7 per cent in the first half of 2022.
Reserve Bank Governor Adrian Orr has a policy of following "the path of least regret".
The committee said it saw the 'path of least regret' was "to increase the OCR by more now, rather than later, to head off rising inflation expectations and minimise any unnecessary volatility in output, interest rates, and the exchange rate in the future".
Ben Udy at Sydney based Capital Economics said they expected the Reserve Bank to "hike the OCR to 3 per cent by the end of this year".
OPINION: Economic and fiscal forecasts demand more aggressive reform.