Why your mortgage rate must rise

A bitter war for mortgage market share has left banks' margins on lending at historic lows, say banking commentators David Tripe and David Chaston. And the banks won't wear that for long.

That war raged in the early part of the year, led by BNZ, Kiwibank and Bank Direct, and was all the more intense as the banks faced up to a cooling housing market and credit boom.

James Munro, managing director of new mortgage market entrant SuperBank, says consumers benefited in the short term and banks' margins crumbled, but banks won't let that go on forever and pay-back time is coming.

Munro says: "These 25 point increases are getting passed straight onto customers, but those rises are going to get bigger in the next six months."

The first signs of this scenario unfolding have begun to appear in the market following the Reserve Bank's well-flagged decision to raise the official cash rate (OCR) from 5.75 per cent to 6 per cent on Thursday July 29.

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