Banks react to official cash rate rise – the good and bad news for savers and borrowers
Two banks will increase the interest rates on their floating home loans while also upping how much interest they will pay to savers.
While a third bank has said it will hold its key loan interest rate for small business borrowers steady until the end of year and keep its floating home loan rate on hold for now.
The announcements came just minutes after the Reserve Bank lifted the official cash rate from 0.25 per cent to 0.5 per cent in a widely anticipated move.
ANZ New Zealand immediately announced it would pass on part of the rate rise by increasing its floating and flexi home loan rates by 0.15 per cent from October 12 for new loans and October 26 for existing loans.
Ben Kelleher, ANZ NZ’s managing director personal banking, said the bank was committed to supporting people with their home-ownership aspirations.
“This rate change balances this alongside the increase in OCR and our wholesale funding costs.”
Kelleher said rates were still low by historic standards.
“Interest costs are still relatively low, and we’d encourage customers to take the opportunity to repay as much debt as they can.”
ANZ would also increase interest rates on a number of savings and call accounts including online accounts from October 12 and its serious saver accounts from November 1.
Kiwibank said it would pass on the full 25-basis-point rise to borrowers on variable rates which include floating home loans.
Nicole Pervan, Kiwibank’s general manager product, said even with the increase its rates remained well below those of the major banks following a big cut in June last year which saw it slice 100 basis points off its variable home and business loans.
“We challenged the market last year by significantly lowering our variable rates and despite today’s OCR rise, we are still well below all the large Australian banks, underlining our commitment to helping Kiwi realise their home-ownership goals.”
Kiwibank will also be increasing a range of savings and term deposit rates.
“We know the low-interest-rate environment has been challenging for some customers who rely on returns from savings, so we hope this is good news for them,” Pervan said.
The rate on its Notice Saver 90 Day account would increase from 1 per cent to 1.25 per cent. Its term deposit rates will increase from October 8 and from October 11 for other savings accounts.
Meanwhile ASB said it would hold the interest rate on its most common small business loan until the end of the year and would keep its variable home loan rate unchanged at 4.45 per cent.
ASB will instead be passing through the full OCR increase to customers with Savings Plus and Headstart savings accounts, taking the maximum interest rate on both accounts to 0.40 per cent.
Tim Deane, ASB’s executive general manager business banking, said it was acutely aware small business owners throughout the country were doing it tough right now and every little bit of financial relief helped them to get through.
“While the OCR increase puts pressure on our funding costs, we won’t be passing this cost through on our business base rate which is used to price loans most commonly used by our small business customers. We hope this commitment brings some small peace of mind to small businesses at this highly uncertain time.”
Most home loan borrowers are on fixed-term rates, meaning the floating rate rises will not have a widespread impact. Fixed-term rates have already risen in the last few months off the back of the anticipated increase in the OCR.
Jose George, Canstar general manager, said the increase in the OCR was likely to be the start of a series of upward moves.
“While today’s rise has already been factored into home loan retail rates, more increases are expected. This will cause pain for some Kiwis.”
He said many first-home buyers would have borrowed at really low rates in a fairly relaxed lending environment, to purchase in an exorbitantly-priced market.
“With borrowing and living costs now rising, reality will bite.
“Rate hikes will also hurt small business owners, already suffering from the effects of the pandemic. Many of them would have financed their businesses on the back of residential assets, and they will find themselves in the squeeze between rising costs and an uncertain future.”
After years of cheap money, the pressure is coming on. It will be timely for all of us to audit our spending, and see where we can make some savings to ease the pain.
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