Fixed-interest loan rates up - and further rises predicted

ANZ National bank has been the latest to increase its long term fixed interest rates

Major banks have raised some fixed-interest loan rates, and one finance commentator is warning of more increases to come.

The public have become more used to seeing mortgage and loan rates tumbling in recent months as the Official Cash Rate has been repeatedly cut.

But the ANZ-National Bank yesterday was the latest announcing increases in its longer-term fixed interest rates for mortgages and business loans - blaming competition for savings for putting upward pressure on the lending rates.

Its three-year rate has risen from 5.99 per cent to 6.15 per cent; the four-year rate from 6.40 per cent to 6.55 per cent; and the five-year rate from 6.50 per cent to 6.75 per cent.

Kiwibank has also lifted its five-year fixed rate by 26 basis points to 6.75 per cent, effective this morning, but spokesman Bruce Thompson said no further increases had been planned.

Westpac increased its fixed-term home loan rates on Friday, pushing the three-year rate up 16 basis points to 6.15 per cent, the four-year up 15 points to 6.55 per cent, and the five-year up 25 basis points to 6.75 per cent.

ASB increased its rates on March 13, with the three-year fixed rate up from 6.05 to 6.15 per cent, the four-year up from 6.40 to 6.55 per cent, and the five-year up from 6.65 to 6.75 per cent.

As of Saturday, BNZ has raised its standard fixed-interest housing rates from 6.39 to 6.49 per cent for four years, 6.49 to 6.69 per cent for five years, and 6.79 to 7.20 per cent for seven years.

But a spokesperson said the current rates were still at "a historic low".

Finance commentator Bernard Hickey, of interest.co.nz, said there was a lot of competition within New Zealand for cash deposits, and banks were also finding it harder to raise money offshore cheaply.

"They haven't been able to raise any long-term money in the last four months ... International investors are not keen on New Zealand while there's this uncertainty about its international credit rating hanging over its head."

Credit rating agency Standard and Poor's has signalled it may downgrade New Zealand's credit rating.

David Tripe, director of Massey University's Centre for Banking Studies, said lenders also expected an economic recovery in the coming years, and the increases would help to bring the longer-term rates into line with short-term lending rates, which would be "rather higher".

Mr Hickey predicted more rises in the fixed-loan rates. "Central banks around the world are printing money hand over fist, which is going to drive inflation through the global economy, and when you have inflation rising, long-term interest rates rise too."

The Herald sought the banks' intentions for term deposit rates but had no answers by late yesterday.