Banks blame rate rises on heavier costs

Kiwibank is blaming rising funding costs on its decision to lift mortgage rates twice since the start of the year.

According to interest.co.nz, the state-owned bank announced increases to its two, three, four, and fiveyear fixed-term rates on January 9 and again yesterday.

The total increase ranged from 26 basis points to 35 basis points and pushed its two-year fixed-term rate up from 4.39 per cent to 4.65 and its five-year up from 5.40 to 5.65 per cent.

A spokesman said yesterday’s adjustments were “relatively minor”.

“Costs are rising. Not all adjustments are connected to the OCR [official cash rate].”

The OCR was last adjusted in November, when it was cut to a record low of 1.75 per cent. The next cash rate decision is due on February 9 although economists are not expecting any change.

However, banks have been talking about rising costs as they have been forced to borrow more money in the international market.

Kiwibank was not the only bank to increase rates. ASB also announced changes to its mortgage and deposit rates yesterday.

ASB will lift its variable loan from 5.65 per cent to 5.8 and has increased its six-month, 12-month and 18-month fixed-term mortgage rates by 10 basis points on standard and special rates.

The bank boosted its 90-day deposit rate from 2.6 to 2.75 per cent and lifted its 18-month special rate from 3.5 per cent to 3.75 but cut its ninemonth rate from 3.6 to 3.35 per cent.

Ian Park, executive general manager retail and business banking, said the changes reflected increased funding costs in local and international markets.