ASB blinks first on mortgage rates

RICHARD MEADOWS
Last updated 10:52 23/06/2014

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ASB Bank has raised its short-term fixed home loan interest rates and bumped up some others.

The move is expected to prompt a flurry of similar action from rival banks.

ASB has increased all its fixed home loans for terms up to two years, and scrapped two of its special deals in longer-term categories.

All the major banks have moved their floating mortgage rates higher following the Reserve Bank's latest official cash rate (OCR) increase earlier this month.

While floating rates are closely tied to the OCR, economists warned that fixed rates were also likely to rise, as the central bank had surprised the market by sticking to its scheduled series of increases.

ASB has increased its six-month, one-year, 18-month and two-year rates by a range of 15 to 31 basis points.

The move is likely to spark similar changes from rivals, as banks tend to make pricing decisions in clusters.

Rule Financial Services mortgage broker Simon Rule said: "It's inevitable. They follow each other like lemmings."

The up side is that banks are also likely to ease up on their longer-term mortgage rates.

"We've always believed in the broker community that there's been a lot of fat in the two, three, four-year rates," Rule said.

Banks had been giving good customers with decent equity discounts as high as 65-85 basis points on the longer-term rates, which was "unheard of", he said.

ASB has canned its special deals, but dropped advertised rates by 20, 39 and 41 basis points for three, four and five-year rates respectively.

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