More banks lift interest rates

RICHARD MEADOWS
Last updated 10:35 13/06/2014

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ASB and The Co-operative Bank have followed ANZ's lead and passed on the latest Official Cash Rate increase to home loan borrowers in full.

Yesterday the Reserve Bank raised its key interest rate to 3.25 per cent, as was widely expected.

ANZ was quick to announce it would match the rise, increasing its floating and flexible rates by 25 basis points this month.

The Co-operative Bank followed suit yesterday evening, as did ASB this morning, with both passing on the full 25 basis points.

Kiwibank and BNZ are also yet to move, but Westpac is the bank to watch, as the only major lender to hold its floating rate under 6 per cent so far.

While the OCR is closely tied to floating mortgage rates, economists also expect the latest hike to send fixed home loan prices higher.

That was because the Reserve Bank's resolve to continue its planned schedule of increases had caught the market by surprise, sending longer-term "swap" rates up sharply.

The attractive fixed rate specials that have popped up in recent weeks are expected to vanish.

Already, The Co-Operative Bank has increased its fixed home loan rates up to two years by roughly 15-20 basis points.

The Reserve Bank is forecasting the OCR to be as high as 5 per cent by the end of 2017.

While that will put further pressure on borrowers, it brings welcome relief to savers and retirees, many of whom rely on investment income.

ANZ's mortgage hikes were accompanied by an increase of its high-interest savings account interest, from 4.25 per cent to 4.50 per cent.

ASB increased its term deposit rates from one month to one year by 15 to 25 basis points, and The Co-operative Bank increased two deposit rates by 20 and 30 basis points.

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