BNZ lifts fixed home loan rates as wholesale funding costs climb

BNZ has increased fixed home loan rates across several terms from 5 August, as banks respond to rising wholesale funding costs

Mina Martin · Mortgage Professional

Bank follows ANZ and Westpac in raising fixed rates, but economist sees limited room left to rise

BNZ has become the latest major bank to lift its fixed home loan rates, increasing terms from one year through to four years, effective 5 August.

Rates rise across the board

BNZ's standard one-year rate rises 20 basis points to 4.99%, while its 18-month rate lifts by the same margin to 5.29%. Two- and three-year rates increase 16 basis points, both landing at 5.45%, and the four-year rate rises a smaller six basis points, also to 5.45%. The five-year rate holds at 5.49%. A low equity interest rate premium continues to apply to all new or existing lending over 80% LVR.

The increase follows ANZ's own rate rise, which it attributed to a broad lift in wholesale interest rates amid continued global uncertainty. One-year swap rates have climbed from just over 3% in early July to 3.43%, while two-year swap rates have risen from 3.36% to 3.7% over the same period, pushing up funding costs for lenders across the board.

BNZ's rise follows both ANZ and Westpac, which lifted fixed rates in late July, also citing the Middle East conflict as a driver of higher funding costs.

Limited room left to climb, economist says

Infometrics chief forecaster Gareth Kiernan told RNZ that financial markets had largely priced in the path ahead for the official cash rate, with little additional movement expected in fixed mortgage rates from here.

"That's in line with our forecast, pretty much all of what I expected is already priced into rates. You might get another 10 basis points, maybe slightly more on the one-year rate before the end of the year but I don't see a great deal of pressure on the one-year rates past that," Kiernan said.

He said rates could edge modestly higher into 2027 as anticipated official cash rate increases materialise, but not dramatically.

"Even through 2027 as the expected rate increases become reality you might get a bit more but I'm talking about a one-year rate at maybe 5.4% and the two-year at 5.7%. It's not huge, assuming the world behaves itself, there's not massive amounts of lift left," he said.

Kiernan added that a return to 6% mortgage rates was unlikely under current conditions.

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