BNZ increases home loan interest rates despite official cash rate's expected pause

  • 11/07/2023

Several of BNZ's home loan interest rates have increased despite expectations the Reserve Bank (RBNZ) will pause its hike of the Official Cash Rate (OCR).

On Tuesday, BNZ indicated its one-year special rate lifts from 6.99 percent to 7.09 percent, its two-year rate from 6.59 percent to 6.75 percent and its three-year rate from 6.9 percent to 6.49 percent.

The two-year rate jump equals about $24 a fortnight for a person with a $500,000 home loan.

The standard rates were lifted by the same amount, which took the one-year standard rate to 7.69 percent and the two-year to 7.35 percent.

It comes after other major banks Westpac and ANZ increased a raft of rates last week, following ASB and Kiwibank.

BNZ's increases come just one day before the Reserve Bank (RBNZ) will give another OCR update, where it's widely predicted the rate will remain at 5.5 percent.

The RBNZ began its aggressive tightening cycle in mid-2021, and if Wednesday's update lives up to expectations, that pause will be the first since.

On Tuesday, independent economist Cameron Bagrie told AM RBNZ's tightening appeared to have done the job.

"They're in quite a sweet spot compared to other central banks around the globe."

Bagrie believed the RBNZ went hard and early on OCR hikes to tackle inflation, telling AM it has resulted in getting to the sweet spot a "tad earlier" than other nations.

"They noted in May there was a high bar to hiking again so they're going to sit back, and they're going to wait and hope that inflation tracks down as projected."