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Banks Urged To Remember Borrowers As Interest Rates Rise

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, March 24 NZPA - Rising fixed-interest loans at major banks is good news for the country's savers, but the Finance Minister has urged banks to remember their borrowers.

Yesterday, ANZ-National Bank was the latest to announce increases in its longer-term fixed interest rates for mortgages and business loans, taking its three-year rate from 5.99 percent to 6.15 percent; the four-year rate from 6.4 percent to 6.55 percent; and the five-year rate from 6.5 percent to 6.75 percent.

Kiwibank lifted its five-year fixed rate to 6.75 percent from today, while in the past week or so Westpac, BNZ and ASB have lifted some longer term rates.

While recent declines in interest rates have been good news for mortgage-holders and other borrowers, savers -- particularly retired people who depend on the interest they receive from their deposits -- have been disadvantaged.

"Deposit rates are going up, there's a limited amount of cash and a number of banks chasing it," Finance Minister Bill English told reporters.

"That is good news for people who are saving, particularly older people who have had their incomes cut quite considerably in recent years."

Banks were lifting longer-term rates now -- despite recent cuts to the Official Cash Rate as the central bank tried to stimulate the slowing economy -- because they were finding it expensive to raise money in New Zealand, Mr English said.

"I understand some banks were going to set out to raise money offshore some time in the next month. If they do, we hope they're successful."

The Government hoped banks would still take into account the pressure they were putting on their borrowers, he said.

Prime Minister John Key told NZPA that lower interest rates were better for economic growth, "so we obviously would like to see interest rates maintained as low as they practically can".

Massey University director of banking studies David Tripe said a variety of factors would be causing upward trends in long-term interest rates.

"One of those is that people are expecting some economic recovery in due course.

"That means that as the economy recovers the current low level of interest rates would not be expected to be sustained," he told Radio New Zealand.

There was also competition for longer term funding from corporations and local authorities.

"And the third factor is that with a number of governments around the world starting to run substantial government deficits, they are building up their debt levels.

"One of the ways by which governments traditionally reduce the impact of their debt levels is by allowing a bit more inflation, so that the cost of the debt declines in relative terms."

Economist Gareth Morgan told Radio New Zealand it might be time for people with mortgages to begin moving part of their loan from a floating rate to a fixed rate.

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