Westpac increases home loan rates

Westpac has become the latest bank to increase interest rates.

It said on Thursday it was increasing a range of its rates.

Its one-year rates lift by six basis points, to a special rate of 7.25% and a standard rate of 7.85%.

Its two-, three- and four-year rates lift by 20 basis points.

That puts the special two-year rate at 7.49%.

It has also lifted term deposit rates by up to 60 basis points, on a two-year term. It now offers 6% per year for that period of time.

It follows ANZ, which increased longer fixes but cut its six-month rate.

The Reserve Bank has indicated that it expects the official cash rate to remain on hold at 5.5% but now expects it to remain there for longer.

Its latest forecasts are for any rate cuts to come in 2025.

Infometrics chief executive Brad Olsen said at the time the increase in home loan rates on the longer terms was driven by increases in government bonds in the last couple of weeks.

“The 10-year NZ Bond rate has increased 46 basis points since the start of August. International longer-term rates have been rising too, driven by a view emerging that central bank rates will need to stay higher for longer.

“Higher US bond issuance has also pushed up bond yields internationally. Continued stronger-than-expected economic trends both here and overseas has fuelled expectations that global central banks won’t be able to relax as quickly as hoped, and that’s been raising longer-term borrowing costs.

“The increases announced here do appear to be driven by a continued rise in the cost of international borrowing, and also reinforce the view signalled by the Reserve Bank last week that there is a risk that rates needs to go higher, and certainly that rates look likely to need to stay higher for longer.

“More generally, the continued pressures on global interest rates show there’s a rising risk that interest rates might still have a bit more to go before they reach a peak – and that this risk is higher than we’d seen previously.”