ANZ hikes all mortgage rates above competitors, but leaves most savings rates as they are

ANZ lifted only two of its deposit and PIE fund rates.

Its 270-day and one-year savings rates are up 15bps to 3.55% and 3.85% respectively.

The rest remain the same, with rates above the 18-month mark sitting between 4% and 4.8%.

Interest.co.nz publisher David Chaston expected ANZ’s move to pave the way for other banks to lift their rates too.

ANZ’s move followed the Reserve Bank last week saying it expected to lift the Official Cash Rate (OCR) more aggressively, and sooner than previously expected.

It sees the OCR rising from 2.25% to around 2.8% by the end of the year.

The Reserve Bank’s revised outlook didn’t surprise the market, which was already expecting, and therefore pricing in, more aggressive OCR hikes to curb inflation caused by conflict in the Middle East.

At 2.25%, the OCR is seen to be accommodative. The hikes pencilled in will get it to a neutral level.

While the OCR has shifted from late last year, mortgage rates have been drifting higher due to market pricing, which has a greater effect on longer-term mortgage rates and shorter-term or floating rates.

For example, two-year mortgage rates sat at 4.5% in November, a percentage point lower than ANZ is now offering.

Speaking to the Herald on Friday, Reserve Bank chief economist Paul Conway said higher mortgage rates had given the central bank some breathing room.

In other words, the market was doing some of the work for the Reserve Bank, dampening economic demand and therefore inflation without an OCR hike.

Because the market was unsurprised by the Reserve Bank’s stance, wholesale interest rates (which affect mortgage rates) didn’t move much in response to its OCR review and publication of its quarterly Monetary Policy Statement.

However, the Reserve Bank noted in its statement that banks had been slow to move their rates higher, as wholesale rates had shifted higher in recent months.

In fact, it said the spread between retail and wholesale interest rates had decreased to historic lows.

The Reserve Bank’s explanation was that banks had been cautious about passing on changes in wholesale interest rates too quickly, as the environment was uncertain and volatile.

It also noted that, because banks weren’t lifting their term deposit rates by much, they didn’t need to lift their mortgage rates by much.

The banking sector in New Zealand continues to be very profitable.

In the March quarter, ANZ NZ’s net interest margin was 2.4%, its return on equity 13.9% and its return on assets 1.3%.

Jenée Tibshraeny is the Herald’sWellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.