Two raise mortgage rates

Two of the main instigators in a cut-throat mortgage price war that has unsettled the Reserve Bank have thrown in the towel and raised their home-lending rates.

ASB Bank, the country's largest provider of home-loans, lifted its two-year fixed rate from 6.95 to 7.7 per cent on Saturday and was followed yesterday by an announcement of an increase from the Bank of New Zealand.

But the BNZ, which spent more than two months trying to snatch market share from ASB by pledging to beat any fixed two-year loan, says it always flagged its intention to end the campaign a week before Christmas.

The bank remains below the ASB, after lifting its rate from 6.9 to 7.6 per cent, and promised last night to offer another round of competitive deals once home-buying picks up next year from a holiday lull.

All eyes are now on the ANZ Bank, which last night remained at 6.95 per cent for two-year loans, the lowest of the main banks.

BNZ spokesman Blair Vernon denied that the end of his bank's "unbeatable" campaign would spoil anyone's Christmas.

He said the housing market was traditionally quiet at this time of year, when people were more focused on other things, and the bank's campaign had been pitched at the high-activity spring period.