Starting this Tuesday, Westpac is enacting increases in various home loan interest rates. The rates for six months, one year, and two years will each see a 10 basis point uptick, resulting in a special two-year rate of 7.09%. Additionally, three- and four-year rates will experience a 16 basis point increase, while five-year rates will go up by 26 basis points.
In particular, the special rate for five years will be established at 6.65%. Standard rates will vary from 7.25% for five years to 7.95% for one year.
Despite the official cash rate remaining stable at 5.5%, several banks have recently raised their interest rates. ANZ economists attribute these increases primarily to a notable surge in global rates, subsequently elevating local swap rates. Anticipation of a higher Official Cash Rate (OCR) in the future is also a contributing factor.
In comparison, typical 30-year mortgages in the US have seen a 1.4% increase this year, surpassing the rise in New Zealand's two-year rates. Since May, the average rate for new lending has risen by about 20 basis points.
Borrowers are faced with the challenge of navigating an inverted mortgage curve, making it a complex decision whether to opt for a longer fixed period, possibly near the peak of the cycle, or to choose a shorter fixed term at a higher rate. While determining the superior option is not straightforward, breakevens tend to decrease more rapidly than anticipated, hinting that opting for a longer term fix may ultimately be more economical.
On Monday, ANZ raised the test rate used to assess borrower applications to 9.1%.