Three banks raising mortgage rates after Brash move

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Three banks are lifting their mortgage interest rates after the Reserve Bank's decision on Wednesday to increase rates.

WestpacTrust and the Bank of New Zealand are raising floating home loan rates from 7.25 per cent to 7.6 per cent.

For people with a $100,000 mortgage, the rise adds about $21 a month to repayments.

BNZ and BankDirect are also raising fixed rates, by smaller margins. BankDirect's floating rate stays at 7.1 per cent.

The interest rate rises were widely predicted after the Governor of the Reserve Bank, Dr Don Brash, announced that its official cash rate would go up by 0.25 per cent to 5.25 per cent, pushing up the 90-day bill rate.

The managing director of BNZ, Mike Pratt, blamed the increases on the Reserve Bank's move, which he said was a sign of strengthening global and domestic growth.

A spokeswoman for WestpacTrust said its decision was based on a combination of the official cash rate increase and increasing pressure on the wholesale rate.

Representatives of ASB Bank and ANZ/Postbank said their banks had no immediate plans to review rates. "But obviously rates are moving and we are keeping an eye on them," said ASB's general manager of banking operations, Hugh Burrett.

The director of Massey University's Centre for Banking Studies, David Tripe, said the increase to 7.6 per cent might indicate the banks expected further rises in the wholesale rate.

He said the adjustment to the official cash rate would have been a factor in the bank's decisions, but they were really just catching up with underlying trends.

BNZ's new rates are effective from Tuesday for new customers and from February 22 for existing customers. WestpacTrust's go up on Thursday and BankDirect's went up yesterday.