Increases come thick and fast

The Reserve Bank’s decision to push up the Official Cash Rate to 6% 11 days ago (Thursday July 29) has finally been expressed in the home loan rates offered by most lenders in the past week.

During the week most providers increased their rates in short term area, however the response has been varied.

Normally when the central bank increases its OCR lenders increase their floating rate by the same amount. The reasoning behind this is that short-term lending rates are set off what is happening in the New Zealand money market and the longer-term rates are set off the United States market.

Last week though not all home loan providers who increased their rates increased their floating rate, those who did moved by the same 25 basis points as the Reserve Bank. The other development was that many lenders also increased their short term fixed rates (six months, one year and two year) by around 10 basis points.

What’s the best deal at the moment? The consensus view is still clearly that fixing for two years is the best option. The most noticeable developments in this area are that BNZ is no longer undercutting its competitors, as it did earlier this year.

Read More - Opens in a new window