Rapid rate rises for NZ

What’s prompted the spike in interest rates?

New Zealanders have seen a recurring hike in interest rates, thanks to changes in legislation and The Reserve Bank powers, which has led to the banks holding more capital for investment lending. This means they are now facing a shortfall and having to borrow more money from offshore sources. Internationally, rates have also been going up, making it more costly to borrow.

People have not been investing cash in the bank recently because of the low interest rates, so the banks are now increasing investment rates to try to attract some of that money back. However, this means they also have to charge more for lending money in an attempt to regain balance.

Why are the smaller banks able to keep their rates down while the big banks are increasing theirs?

The smaller lending institutions have a smaller lending base and therefore need less capital. They aren’t lending as much as they aren’t considered main stream. Typically, most people tend to go to the big four banks. However, as they attract more lending, they potentially won’t be able to keep increasing their rates.

In an ever changing market where each bank operates differently, it’s important that clients have choice. Consulting with a mortgage broker can make them aware of the what is available for their financial situation.