Rising interest rates: some borrowers will see their interest costs double
Mortgage interest rates continue to rise, with two new increases announced by Kiwibank.
He said he would increase his special one-year rate from 2.65% to 2.95%. Last week it went from 2.49% to 2.65%.
It would also increase its two-year special from 2.89% to 3.15%.
Normal rates would drop from 3.5% to 3.8% for one year and from 3.74% to 4% for two years.
* Banks hike interest rates despite Auckland lockdown
* ANZ lifts most fixed lending rates as mortgages become more expensive
* SBA raises interest rates on longer-term fixed home loans as economies start to recover
Other banks have also raised their rates recently, but are currently lagging behind Kiwibank on one-year rates – ASB, Westpac and BNZ are announcing a one-year rate of 2.85%, while ANZ is offering 2, 6%.
Kiwibank chief economist Jarrod Kerr said people have gotten used to interest rates “with a 2 in front of them and we expect they will drop to 4”.
He said many borrowers would never have seen their rates rise before.
âBut the older generation will look at these rates and almost laugh. They are not high and they will not reach very high levels either. “
If a borrower went from around 2% to an eventual high of around 4%, their interest charges would double.
But Kerr said that while it would hurt some people, their claims should have been valued at an interest rate of around 6 percent, so the increase was manageable.
âInterest rates are rising for good reasons, the economy is doing well, wages are rising, the job market is tight and there is inflation. You would rather see a situation where rates are going up rather than going down.
Kiwibank’s two-year rate is less than 3.25% for ASB, Westpac and BNZ, but more expensive than 2.99% for ANZ.
Economist Shamubeel Eaquab said rates were back to where they were before the lockdowns began.
âThe banks are trying to suppress emergency interest rate cuts. The Reserve Bank will be relatively comfortable with this because it does not want to change the policy rates and send the wrong signal. “
Other banks would likely follow Kiwibank, he said.
A $ 500,000 mortgage on 2.65% over 25 years would cost $ 2,281 per month.
If that increased to 2.95 percent, it would cost $ 2,358. At 4 percent, that would be $ 2,639.