KEY POINTS:
Shopping by credit card looks set to become more expensive.
The other main trading banks are expected to follow the BNZ in coming days and raise credit card interest rates.
On Wednesday the BNZ announced the rate on its Standard and Gold Visa and Mastercards would rise one percentage point to 21.95 per cent from March 1.
David Chaston, publisher of website interest.co.nz, said New Zealand credit card holders were starting to pay the price of the international credit crunch.
He said in recent months banks had been having to pay a lot more for the wholesale money they use to fund consumer lending such as floating home loans and credit cards, and the BNZ "couldn't hack it anymore".
"They were nervous about doing it and being the first to move. I would expect the others to follow suit, not necessarily right now, they may make the BNZ squirm a bit."
Chaston said even though the Reserve Bank had not raised the Official Cash Rate since July, the 90 day bank bill rate - the wholesale market for money - had been rising.
He said the international credit crunch, sparked by the US sub-prime mortgage crisis, basically meant "banks not trusting other banks".
In order to make a wholesale money market, they were forced to offer higher and higher premiums. He said New Zealand banks had always paid a premium for wholesale money, but now that premium had doubled.
ANZ chief economist Cameron Bagrie said there was "a lot of volatility" in world markets. "At the moment we are very closely watching overseas developments. What we've seen of late is a whole hotch-potch, to be honest."
He said while there were some signs interest rates could start coming down, equally if the credit crunch extended that was a case for rates remaining high.
"The nature of current global unease is all about credit and New Zealand's very reliant on credit, we love debt. So New Zealand is very vulnerable to that sort of turn in sentiment."
Chaston said so far New Zealand had got off lightly but the crunch was not over and it could "bite hard".
"I wouldn't be putting my money on the fact that in the intermediate term, in the next two or three years, that these rates are necessarily going to be a heck of a lot lower."
He said there would be some up and down - for example the easing in two-year fixed mortgage rates from around 9.6 per cent to 9.5 per cent, which had happened because the international interest rate swaps market on which the rates are based had softened.
Massey University banking expert David Tripe said the US Federal Reserve's recent moves to cut interest rates by 1.25 per cent would only have a flow-on effect to New Zealand if international interest rates generally went down.
Bagrie said the flipside of the credit crunch was if there was a global recession and that impacted on New Zealand, our Reserve Bank would cut interest rates aggressively.
