Kiwi Banks Raise Home Loan Rates as Reserve Bank Warns of Higher Inflation

New Zealand homeowners may be in for more mortgage pain as major banks begin to lift home loan rates. Westpac has become the first major bank to increase its fixed mortgage rates, citing higher wholesale funding costs driven by global market volatility.

The bank increased its one-year special rate by 0.20% to 4.99%, while its two-year special rate rose to 5.39%. This move comes after months of falling borrowing costs, which have been a boon for homeowners.

Analysts believe further OCR increases remain possible if inflation proves stubborn, and the Reserve Bank has signalled that inflation remains a concern. As a result, economists are warning that borrowers shouldn't expect mortgage rates to fall again anytime soon.

Mortgage advisers urge homeowners nearing the end of a fixed term to compare offers from multiple banks and negotiate with their existing lender before refixing, as advertised rates are often not the lowest rates available.