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Rise In Longer Term Fixed Mortgage Rates No Surprise

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, March 24 NZPA - Recent rise in some fixed-interest loans by major banks are not unexpected, Massey University director of banking studies David Tripe says.

ANZ-National Bank was yesterday 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.

Mr Tripe said today 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.

"Number two is that there is some competition for the longer term funding, in that we've seen some corporations and local authorities and the like out there raising funds for longer terms, so that's providing some competition for the banks in raising funds at that sort of maturity," Mr Tripe said.

"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."

An anticipation of inflation would also provide some justification for interest rates to be higher, he said.

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.

The Government have so far not commented on the rate rises.

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