One of the major banks going against the grain and forecasting the Reserve Bank of New Zealand’s next move will be to slash the Official Cash Rate has, in a surprise twist this week, hiked its mortgage rates.
Kiwibank’s latest mortgage rate increase takes its one-year fixed rate from 6.99% to 7.15%, which still makes it one of the cheaper offerings from the major banks.
BNZ followed suit and lifted some of its rates this week with the 18-month special rate up from 6.95% to 7.09% and the special two-year rate from 6.85% to 6.99%. Its one-year rate currently sits at 7.19%.
But despite the lifts, Kiwibank chief economist Jarrod Kerr is still standing strong on his controversial view that the OCR has reached its peak at 5.5%. It’s a view that other banks such as Westpac and ANZ don’t necessarily share.
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Instead, he said the latest mortgage rate rise was due to a lift in wholesale rates on the back of the financial market now predicting a 50% chance of it rising by 25 basis points in November and competition heating up around term deposit rates.
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Mortgage brokers told OneRoof this week that some major banks were opting not to compete over mortgage rates, but Kerr said they were all competing over term deposits with many of them including Kiwibank’s offering about 6%. Westpac's one-year term deposit dipped to 5.9% this week.
Kerr said when money coming into the bank was costing a similar amount to that going out, then something had to give.
“We bring money in the door, and we pay for example 6% for this new funding and then we lend it out and it has to be obviously a lot more than 6%.”
While Kerr hasn’t completely ruled out mortgage rates rising again, especially if the OCR goes against his predictions and moves up again, he is hopeful any more increases will be coming to an end.
Kiwibank chief economist Jarrod Kerr is still forecasting that the OCR will stay flat until it drops in about May 2024. Photo / Supplied
“I would hope that we can get into next year with mortgage rates peaking around these levels and I’m thinking if all this plays through and if the economy slows down as expected then hopefully the next move is actually a rate cut, not a rate hike and we can actually start thinking about mortgage rates coming off next year.”
Kerr told OneRoof last week that he expected the OCR to stay flat until May 2024 when a decrease of about 25 basis points would likely be the first of several drops to both the OCR and therefore interest rates next year.
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