Borrowers who went floating now trapped by rising fixes
ASB has increased its four- and five-year fixed home loan rates by 16 and 24 basis points respectively, citing rising wholesale funding pressures.
The changes take ASB’s standard carded rates up to ANZ’s levels and leave the bank around 25 to 40 basis points above comparable carded offers from BNZ and Westpac.
Since the start of 2026, one-year swap rates have risen about 10 basis points, while two- to five-year swaps are up roughly 20 basis points, pushing up longer-term funding costs and feeding through to fixed-rate pricing, interest.co.nz reported.
Floating borrowers face a painful rethink
Late in 2025, many borrowers moved from fixed to floating, betting that rate cuts would arrive quickly and that it was worth waiting for cheaper long-term fixes. That strategy is now looking like a busted plan for those still on floating rates.
Five-year fixed rates were under 5% as recently as October last year, and Reserve Bank data show more borrowers starting to lock in for longer, out to five years, capturing those cycle-low offers.
By contrast, customers who went fully floating are now facing rising variable rates and may still have to refix at higher levels.
Many risk ending up with the worst of both worlds – higher short-term costs on floating, then higher fixed rates when they eventually decide to lock in.
Inflation, global risk, and bank margins in play
Markets are pricing in a more hawkish Reserve Bank as inflation shows signs of re-accelerating and a new governor takes a firm line. New Zealand’s CPI rose 0.6% in Q4 2025, lifting annual inflation to 3.1% and reinforcing expectations that mortgage rates will stay higher for longer. Traders are bringing forward expected official cash rate hikes, lifting swap rates and, in turn, longer-term borrowing costs.
Global risk premiums are also edging higher amid concerns about US and Japanese policy settings, adding to wholesale funding pressure.
At the same time, large Australian-owned banks are grappling with margin compression after a period of rising costs and heavy investment, making them more sensitive to preserving profitability as they reset mortgage pricing, interest.co.nz reported.
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