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One of the country's leading trading banks has raised its standard credit card interest rate to almost 22 per cent, effective from March, citing the higher cost of short-term funds.
The BNZ's move, which will be closely watched by other banks today, was part of a general "repositioning" of rates, including an increase in variable mortgage rates which takes effect next month, and cuts to fixed mortgage rates.
BNZ will now charge 21.95 per cent on Standard and Gold Visa and Mastercards from March 1, and its standard variable mortgage rate goes to 10.69 per cent on February 15.
"The nature of the market has changed and these rate changes reflect the impact of higher short-term funding costs," said the general manager of strategy and marketing, Blair Vernon.
He attributed the rising costs of 90-day bills to a combination of the Reserve Bank's higher Official Cash Rate and market expectations that rates will remain high for some time.
However, the OCR has been static since July last year and 90-day bank bill rates yesterday were only marginally higher than three months ago, having come down from a short-lived spike around Christmas.
Mr Vernon said the bank had "experienced a sustained high in both the 90-day bill rate and bank funding costs" during the second half of last year.
"While they've come off their peaks, they're still materially different from where they were a year ago and we are not expecting them to get back to pre-crises levels any time soon."
BNZ's cuts to fixed mortgage rates reduce the key two-year rate by 10 basis points taking it to 9.5 per cent, a move mirroring that by ASB Bank last week. However, the decline is less than those recently on the interest rate swaps market which largely drives fixed mortgage rates.
Massey University head of banking studies, David Tripe, said the smaller decrease in fixed mortgage rates compared to swap rate moves further expanded the margin resulting from rate increases earlier this month.
Last night Westpac Bank hadn't moved its credit card interest rates, but a spokesman said the bank would continue to review them in light of current market conditions.
Its variable floating mortgage rate is unchanged at 10.55 per cent, but its two-year fixed mortgage rate dropped at the beginning of the week from 9.6 per cent to 9.5 per cent.
