Co-operative Bank chief executive Mark Wilkshire signals fixed mortgage rate hikes coming ‘pretty soon’

Fixed mortgage rates could be heading up “pretty soon”, says a New Zealand bank boss, as wholesale interest rates rise on the back of volatility in the Middle East.

Speaking on Early Edition with Ryan Bridge, Co-operative Bank chief executive Mark Wilkshire said wholesale rates were up about 30 basis points (bps) in the past couple of weeks.

“I think banks will have to start passing that on.

“Even though the Official Cash Rate [OCR] was priced in, those wholesale markets have lifted. I expect this to be upward pressure on retail mortgage rates.”

Wilkshire said fixed home loan rates could rise “in that region of 30 basis points”.

“It’s going to have to happen pretty soon.

“Wholesale markets have been very volatile on the back of these conflicts.”

On the Co-operative Bank lifting its own fixed rates, Wilkshire said, “I think we’re going to have to go pretty soon”.

“They’re not big changes but I think we’re going to have to see that pass through.”

Last month, lower wholesale interest rates prompted banks to cut some of their fixed rates.

When the Reserve Bank reviewed the OCR a fortnight ago, it noted the spread between wholesale and retail interest rates was wide, meaning there was little pressure on banks to lift their rates.

Because the Reserve Bank had been widely expected to lift the OCR to 2.5%, its move didn’t initially have a major impact on the market.

While floating mortgage rates, which move in lock-step with the OCR, rose as expected, economists told the Herald they didn’t expect immediate fixed mortgage rate rises.

The point Wilkshire made was that geopolitics and global money markets had evolved since then, and there was now more upward pressure on fixed mortgage rates.