In the first move by a bank since the Official Cash Rate was lifted last Thursday, ASB and its subsidiary Sovereign have hiked their floating mortgage rates in line with the Reserve Bank's move of 25 bps.
But they have followed a move lower in longer term wholesale interest rate markets (see interactive swaps rates chart below and here) by cutting their longer term fixed mortgage rates by 5 to 15 basis points.
This narrows the gap between the floating rate and the traditionally more popular 18 month to 2 year rates to just 40 basis points, making the fixed versus floating decision even tougher.
More than half of new mortgages are now floating rather than fixed rate mortgages, lifting the proportion of total mortgages that are fixed versus floating to almost 40% from just 12% three years ago.
This gives the Reserve Bank more potency as it looks to remove stimulus from the economy.
(Updated with ASB moves)
Sovereign lifted its six month mortgage rate by 25 basis points to 6.5% and left its one year rate unchanged at 6.6%. It lifted its floating rate by 25 basis points to 6.35%.
But it cut its 18 month mortgage rate by 15 basis points to 6.75% from 6.9%. Sovereign cut its 2 year rate to 7% from 7.1% and cut its 3 year rate by 5 basis points to 7.35%.
It cut its 4 and 5 year rates to 7.6% and 7.9% respectively.
ASB lifted its variable mortgage rate 25 basis points to 6.25% and its 6 month rate by 25 basis points to 6.35%. It cut its 18 month rate by 15 basis points to 6.60% and its 2 year rate by 10 basis points to 6.85%.
ASB was also the first to move after the Reserve Bank hiked the OCR on June 10 from 2.5% to 2.75%. The OCR was lifted to 3% last Thursday.
However, ANZ-National was the first to move later in June with significant cuts to longer term fixed mortgage rates after wholesale interest rates moved sharply lower.
Earlier this week the NZ Anglican Church Pension Board was the first institution to raise its rates. It lifted its floating mortgage rate by 25 bps to 5.95%. It also raised its one and two year rates, but cut its 3 year rate to 7.1%
Financial markets have reduced market rates on concerns about a slowdown in the global economy reducing longer term inflationary pressures.