Kiwibank launches capped floating rate and hikes short-term rates

Kiwibank is launching a capped floating rate option tomorrow priced at 6.50% for one year and it has also raised its short term rates.  

Monday, June 21st 2010, 5:21PM

by Jenha White

This is the first time Kiwibank has provided a capped floating rate option and communications manager Bruce Thompson says it is to provide certainty for mortgage rate borrowers.

"There is a perception that floating rates will continue to rise, so the capped floating rate provides protection from it going above 6.50%."

A survey by Mortgagerates.co.nz found that economists are expecting the floating rate to go up by around 150 basis points over the next year to around 7.40%.

Thompson says this means the capped rate provides certainty for people who want to stay floating and have the flexibility it offers.

It will cost borrowers $250 to lock in the option.

Kiwibank has also increased its floating, six-month, one-year and revolving credit rates because wholesale rates have gone up sharply.

This follows the lead of ASB who was the first bank to increase mortgage rates last week after the Reserve Bank hiked the Official Cash Rate (OCR) by 25 basis points to 2.75%. ANZ National also followed suit last Friday.

Kiwibank has increased its floating and revolving credit rates by 25 basis points to 5.90% which is still below the floating rate median for the major banks of 5.99%.

Its six-month rate was hiked by 11 basis points to 6.10% and its one-year rate by 10 basis points to 6.45%.

Kiwibank also pulled its low documentation products earlier this month and Thompson says that is because they had no uptake or interest in those products.

"It was close to a year since we last signed one up, we felt that people weren't looking to Kiwibank for low documentation loans and we weren't actively promoting it. We've decided to stick to our base of small traditional loans."

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