Four of New Zealand’s major banks have confirmed they haven’t changed their mortgage serviceability rates following the Reserve Bank’s first increase to the Official Cash Rate (OCR) in three years.
The RBNZ raised the cash rate for the first time since May 2023 last week, from 2.25% to 2.50%.
The 25-basis-point increase was widely anticipated by some bank economists but caught others by surprise. However, most bank economists believe that now the RBNZ has hiked the OCR, multiple further hikes are on the horizon before the end of the year.
Following the cash rate increase, ANZ NZ, ASB, BNZ and Kiwibank told interest.co.nz their mortgage serviceability test rates remain unchanged.
Banks use mortgage serviceability test rates to gauge the repayment capacity of would-be home loan borrowers if interest rates rise. A lower test rate increases borrowers’ borrowing capacity.
ANZ NZ said its current mortgage test rate, which the bank calls the Servicing Sensitivity Rate (SSR), is currently at 6.85%. ANZ NZ is the country’s largest home lender.
According to an ANZ NZ spokesperson, the SSR was last increased to that rate on April 22. The bank did not disclose what ANZ NZ’s prior test rate was.
“The SSR is just one tool we use to assess a home loan application – it alone does not determine how much a person can borrow. It is an internal tool to ensure we are being a responsible lender and is not something we market,” the spokesperson said.
“We don’t compete with other banks to offer lower test rates because the SSR is there to help protect customers when they borrow money. The purpose of adjusting the SSR is to reflect the changes in the interest rate environment across all cycles.”
An ASB spokesperson told interest.co.nz that ASB’s servicing test rate for home loans is currently 6.85% and has remained unchanged since the increase to the OCR.
“We consider a range of factors when assessing customers’ ability to service a home loan, including a servicing test rate. We regularly review our settings to ensure they remain appropriate,” they said.
BNZ's mortgage serviceability test rate is currently 7.1%, according to a BNZ spokesperson, and hasn’t changed as a result of last Wednesday’s OCR decision.
“We regularly review our test rate in line with market conditions and our responsible lending obligations,” BNZ said.
A Kiwibank spokesperson told interest.co.nz that the bank’s test rate was 6.95%, as of July 1, and was not changed post-OCR.
“Test rates are only one of the tools that we use to assess affordability. We take several factors into account when reviewing and setting Kiwibank’s test rates; these include the wholesale rates, carded rates, and the OCR,” they said.
“It’s important to note, test rates are not a prediction of future interest rates; instead, they give us the ability to check the customer can maintain their financial commitments.”
When contacted by interest.co.nz, Westpac NZ was unable to confirm its current mortgage test rate or if it had been changed following last week’s OCR announcement.
A Test Rate table resource is here.
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