Long-term home loan rates rising

Long-term home loan interest rates are rising, and not everyone is convinced it’s fair.

Reserve Bank data shows the average five-year mortgage rate taken out in May was just over 4 per cent, compared to 3.7 per cent in February. Four-year rates rose from an average 3.69 per cent in February to 3.79 per cent.

The average price of shortterm lending fell over that period. Rates up to about 4.4 per cent are now being advertised for five-year fixed terms.

Mortgage adviser Mike Whittaker said he could not understand why the rates were increasing. ‘‘It seems they want to make money on the long term rates as they are popular. As people fix for longer they [banks] will keep pushing rates up because they will make more money.’’

Sam Stubbs, founder of KiwiSaver provider Simplicity, said the amount of difference between what main banks paid for term deposits and charged for home loans had been trending down in the past few months but was still historically ‘‘very high’’.

BNZ, Westpac and Kiwibank were operating with a margin of 2 per cent, according to KPMG.

Mortgage adviser Glen McLeod, of Edge Mortgages, said there had been a noticeable increase in the interest rates charged for longer-term fixes over the past four to six weeks.

But he said it seemed to make sense in the wider economic context. The release of surprisingly strong GDP data last week had prompted predictions that the official cash rate could increase sooner than predicted, and the cost of offshore funding was also increasing as other countries’ economies recovered.

Massey University banking expert Claire Matthews said the changes reflected where longterm interest rates were going. ‘‘Longer-term interest rates have risen since the beginning of the year. Arguably, the banks could have moved earlier. However, I think the recent changes reflect the data about the economy out last week, which shows it has bounced back more than expected.’’

Infometrics chief forecaster Gareth Kiernan said the five-year government bond rate had risen from an average of 0.02 per cent in September 2020 to 1.03 per cent last month. ‘‘In comparison, the five-year mortgage rate has only risen by about 50 basis points.

‘‘So there’s probably more increases to come on the three to five-year mortgage interest rates yet, even if wholesale rates don’t push up any further.’’

A spokesman for ANZ, the country’s biggest bank, said the increase was symptomatic of increases in longer-term wholesale interest rates.