Borrowers who have taken out short-term fixed mortgage rates have narrowly escaped the latest round of mortgage rate rises that target the shorter terms.

Two-thirds of homeowners now have fixed loans, mostly for terms of two years or less according to the Reserve Bank's mortgage figures for May. A year ago, borrowers were evenly split between fixed and floating rates.

Many of the major banks have raised their rates this week. TSB Bank raised all its standard fixed rates up to three years by 10 to 20 basis points. ANZ, ASB, Bank of New Zealand and Westpac raised several short-term rates.

The Reserve Bank's official cash rate (OCR) series of increases last month sent wholesale interest rates higher prompting a wave of fixed-rate rises on top of the usual floating-rate increases.

With another OCR rise expected this month, the ASB bank's economists warn that floating mortgage rates and short-term fixed rates are likely to lift again soon.

Short-term deals are rapidly disappearing so some banks have reduced their longer-term fixed rates:

  • ANZ cut its four and five-year rates significantly, and eased its two-year rate slightly.
  • Westpac lowered its three-year rate to 6.69 per cent and kept its four-year rate unchanged.
  • Westpac lowered its standard five-year rate to 6.99 per cent, falling in line with ASB and BNZ.
  • Fixing for longer terms now would give extra protection in case OCR increases were stronger than expected, according to ASB economists.

"Depending on borrowers' risk appetite, that insurance may be worth taking," they said.

Floating rates were more expensive than many short-term (in some cases up to two years) fixed rates, but floating rates are still historically low and offered flexibility to borrowers, they said.

What the banks are offering

The best standard rates advertised are dominated by the smaller locally owned banks:

  • Six months: 5.7 per cent - Kiwibank, HBS/SBS.
  • One year: 5.85 per cent - Kiwibank, HBS/SBS, TSB.
  • 18 months: 5.99 per cent - HBS/SBS.
  • Two years: 5.99 per cent - HBS/SBS.
  • Three years: 6.25 per cent - BNZ, HBS/SBS, Co-operative Bank.
  • Four years: 6.75 per cent - Co-operative Bank.
  • Five years: 6.79 per cent - HBS/SBS.