The next surge in fixed mortgage rates is coming

ANZ is the first to react to much higher wholesale swap rates stemming from surprise CPI data. The bank raises fixed mortgage rates by around +45 basis points and term deposit rates by around +30 basis points

Well, it did.

Much higher than expected CPI inflation level in Q3-2022 boosted the interest rate markets.

And these pressures have translated into significantly higher fixed mortgage rates.

First to move is ANZ, adding between +34bps and +55bps to its flat rate card.

ANZ’s two-year rate is now well above 6%, and the first time it has been this high since November 2011.

In fact, their rate of almost 6% over one year is the highest since February 2011.

ANZ also raised term deposit rates, between +15 basis points and +75 basis points. This translates into a six-month rate at 3.60% and a one-year rate at 4.30%.

The last time TD ANZ one-year rates were at this level was in February 2015.

(ANZ’s +75bps rise in term deposits was on their five-month supply, but that only takes it up to 3.00%, so more of a curve correction than a meaningful rise).

As ANZ is New Zealand’s largest retail bank, its pricing positioning has an influence on the market. There is no doubt that all his rivals will follow. The only question will be when.

From a borrower’s perspective, those who were on a two-year fixed rate two years ago are going to find the transition difficult. In mid-October 2020, ANZ’s two-year fixed rate was 2.55%. This rate is now 6.19%. If they took out a $580,000 mortgage in October 2020 (equivalent to 80% of the then national median home price of $725,000), their weekly payments will drop from $532 over the past two years to $818 per week for next two years. That’s a +$286/week jump, or +54%. In anyone’s budget, this will hurt.

A useful way to make sense of modified home loan rates is to use our full function mortgage calculator which is also below. (Term deposit rates can be estimated using this calculator).

And if you already have a fixed-term mortgage that is not up for renewal right now, our break cost calculator can help you assess your options. But break fees should be minimal in a rising market.

Here is the updated snapshot of the lowest advertised fixed term mortgage rates currently offered by major retail banks.

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