ASB the first bank to hike mortgage rates and term deposit rates since OCR increase

ASB the first bank to hike mortgage rates and term deposit rates since OCR increase

ASB hikes both variable mortgage rates and call deposit rates by 25 basis points, same as RBNZ hike.

ASB has become the first bank to hike mortgage rates since the Reserve Bank last week increased the Official Cash Rate by  25 basis points to 2.75%, lifting its variable rate and six month fixed rate by 0.25 basis points and one year rate by 10 basis points.

ASB also increased its savings account (call) rates by 25 basis points, but has yet to change it term deposit rates.

ASB's move is widely expected to trigger a raft of hikes by its competitors and ends a standoff that lasted a week.

(Adds image, detail, quotes, links to mortgage rates table, full rates change announcement table)

The variable rate is now 6%, the 6 month rate is 6.1% and the 12 month rate is 6.45%.

ASB said the increases were due to both overseas funding costs and continuing pressure on retail deposit rates domestically.

“The market is now entering a new cycle, and we need to ensure our products are priced appropriately based on our underlying costs," said Catherine McGrath, ASB's Chief Executive Customers, Markets and Products.

"With this in mind, we have also increased a number of our deposit rates today, ensuring our savings customers see the benefit,” said McGrath.

The variable mortgage rate change is effective from 18 June for new customers and from 5 July for most existing customers. Fixed lending rate changes are effective from 18 June for all new lending, and deposit rates change on 25 June.

This puts ASB's variable mortgage rate above the other banks, which are grouped around 5.7%. See all bank mortgage rates here.

The changes mean ASB's call account rates are now above most other banks call account rates. See all call account rates here. 

ASB's term deposit rates have not changed. See all bank term deposit rates up to 1 year here.

See ASB's announcement below:

ASB has today announced increases to both its variable home lending and most savings account rates. Changes have also been made to the six and 12 month fixed lending rates.

Catherine McGrath, Chief Executive Customers, Markets and Products says the decision to increase the variable lending rate by 0.25 percent has been made following the recent increase in the Official Cash Rate, and also takes into consideration wider market factors.

“This is the first increase in the OCR since July 2007, and further increases are anticipated over the coming months,” she says.

“The increases we are making today take into account both our offshore funding costs and the continuing pressure on retail deposit rates in New Zealand. With overall funding costs having increased, we have made the decision to lift our variable home lending and savings account rates by 0.25 percent. Our variable rate is now at 6.00 percent.” “

ASB was the market leader in bringing the variable housing rate down to 5.75 percent in September 2009. This home lending rate has remained unchanged since then, providing mortgage holders with real value over the past nine months.”

“The market is now entering a new cycle, and we need to ensure our products are priced appropriately based on our underlying costs. With this in mind, we have also increased a number of our deposit rates today, ensuring our savings customers see the benefit,” adds Ms McGrath.

The variable home lending rate change is effective as from 18 June for new customers and from 5 July for most existing customers. Fixed lending rate changes are effective as from 18 June for all new lending, and deposit rates change on 25 June.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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ASB hasn't lifted its term deposit rates, but has increased its call account savings rates.

cheers
Bernard

Who said the hot chicks ignored me? ;)

Who said I'm not rich? ;)

cheers
Bernard

Chris_J

Lovely to hear from you.

Here's my explanation http://www.interest.co.nz/opinion/why-variable-mortgage-rates-are-headed... for that 9% figure, which is based on the RBNZ's Monetary Policy Statement, where the RBNZ itself forecasts a 90 day bill rate of 6.1% in 2012.

"Governor Alan Bollard's decision was widely telegraphed and he was at pains to say it was no big deal. The rate increase itself was small and from a record low base.

But the forecasts within the Monetary Policy Statement that came with it show borrowers and savers alike should prepare for an inexorable rise in interest rates to around 9% for floating rate borrowers and more than 8% for bank term deposit holders within the next two to three years."

Happy to take you up on the coffee bet.

I will happily pour a cup of (cold instant) coffee over my head if mortgage rates aren't over 9% some time in 2012.

Yours stirringly

Bernard

Chris_j

Not a bad idea on the solicitors. The trouble is you may well not have had the property boom though without all the cheap lending the banks did from 2002 to 2007.

How is the economy being held to ransom by a bank putting up its variable mortgage rate by the same amount as the Reserve Bank putting up the Official Cash Rate?

cheers
Bernard

Rangerman

The other problem with Chris_j's view that interest rates will stay very low is the idea that the Reserve Bank will have to keep them low because inflation will stay low.

He is essentially betting that the economy won't recover and that unemployment will rise.

That's won't be great for house prices either.

cheers
Bernard