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SBS raises 1 and 2 year mortgage rates

Posted in News February 5, 2010 - 07:57am, Bernard Hickey

SBS Bank has raised its one year mortgage rate from 6.25% to 6.35%, and its two year rate from 7.25% to 7.30%. The move follows Westpac, which raised its one year rate to 6.29% earlier in the week. See and compare all mortgage rates here.

The average bank 1 year mortgage rate has risen from 5.6% in July to around 6.25% as banks lift their fixed mortgage rates to match their higher funding costs. They are competing hard to raise deposits locally by increasing term deposit rates well above the record low Official Cash Rate (OCR) at 2.5% and are also having to pay more for scarcer funds on international wholesale markets. This is delivering a de-facto tightening in monetary policy despite the Reserve Bank leaving the OCR on hold since April last year. It is also helping to take any steam out of the housing market that built up from March 2009 when interest rates hit record lows. The "˜yield curve' has changed dramatically in the last year as variable rates have increasingly become cheaper than fixed rates, reversing the situation seen for 8 years where fixed rates were cheaper than variable rates. This is encouraging many home buyers to opt for variable rates, which will also strengthen the potency of monetary policy when the Reserve Bank does decide to hike the OCR. The central bank repeated on January 28 it would look to hike from the "middle of 2010"³. The proportion of mortgages that are variable has doubled to 26% since hitting a low of 12.5% in August 2007.

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    10 Comments

    by Sean | 05 Feb 10, 10:24am

    A quick look at any

    A quick look at any fixed term deposit board in any bank branch should give you a good idea where mortgage rates are headed. Kind of reminds you where the housing market is headed when you have a look at a pile of overpriced avocado in the supermarket that some idiot bought for way too much and can't bring themselves to drop the price because it "owes them" so many dollars

    by 28_yr_old (now 29) | 05 Feb 10, 10:40am

    Fixed are going up Sean

    Fixed are going up Sean agreed, but floating OCR won't change very much this year, that unemployment rate is too high for Mr Bollard

    by Alan | 05 Feb 10, 10:50am

    I think you're right that

    I think you're right that the OCR won't move until at least middle of the year, potentially later in 2010.

    However, I do think you might see variable mortgage rates rising, irrespective of the OCR, given increasing demand for funds, and the demand for them at variable (rather than fixed rates) just to roll-over existing facilities.

    The market for money is truly global, and sovereign debt demand in 2010 is looking astronomical - demand up, and supply stable should mean the market price of money (interest rates) goes up no matter what the RBNZ does or doesn't do.

    Alan.

    by Shaun | 05 Feb 10, 11:27am

    This is interesting given the

    This is interesting given the news last night said with the weakening dollar that the wholesale cost of funding is coming down so it would appear on face level to be about profit gauging, particularly on fixed rates.

    by adrian | 05 Feb 10, 12:37pm

    The entirety of the banks

    The entirety of the banks Wholesale funding doesn't all happen in one night. So gauging is not applicable...yet.

    by 28_yr_old (now 29) | 05 Feb 10, 2:20pm

    have a read of this

    have a read of this

    http://www.stuff.co.nz/business/blogs/stirring-the-pot/3294567/And-Waita...

    by Sean | 05 Feb 10, 2:55pm

    28_yr_old (now 29) so true

    28_yr_old (now 29) so true so true. You cannot move ahead as separate entities, we must move forward as one group and that is as New Zealanders. I get really offended at the word Pakeha or European to describe me as I am a New Zealander. I often look at the fractured infighting of Middle Eastern groups sadly going nowhere with united groups taking all their land and possesions off them as they fight like feral dogs. If Maori think that they breed themselves into control of New Zealand then they should think again as the business minded Asians have encreased their footprint by 200% in the last 15 years and that will only increase.

    by Andy M | 05 Feb 10, 4:27pm

    mmm... this sentence is very

    mmm... this sentence is very telling:

    "I, however, was derailed again as I was picked up in a Bentley from the airport, which really annoyed me as it could only have been paid for with handouts from us taxpayers and I said as much"

    This sentence says in microcism how most of NZ of european decent think of the maori people. The car in question was supplied by the hotel he was staying at, but the preconceived notion was one of bloody bludgers how dare they spend my money.
    When the average NZer can get past these inherently racist views then we may have something. Not likely in my lifetime though.

    "It also illustrates how different each individual Maori is, how generous and warm some are and how misguided and pig-ignorant and arrogant others are."

    What a load of patronising drivel. You can say this rubbish about any racial group.

    "But wait, there is more. The guest speaker was a Maori surgeon. Fine. He spoke for over 30 minutes in Maori with no translations, no subtitles on the screen and no break. By the end of it the audience was pretty unsettled. He then - in English for 30 seconds - did a translation. I don't think so."

    Well, Maori is one of the official languages of NZ, so perhaps he might care to learn it.

    "am particularly attached to it, but primarily because I am a strong believer in property rights"

    Only European of course, its fine to purchase land off the local Maori for a few lollies though.

    by casual observer | 05 Feb 10, 5:16pm

    Wonder how the residents of

    Wonder how the residents of Portugal, Italy, Greece and Spain feel being referred to as PIGS nations by the BBC......................

    by Roger Thompson | 05 Feb 10, 5:42pm

    I'd sooner live amongst the

    I'd sooner live amongst the PIGS than the POMS .