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ASB Raises Long-Term Mortgage Rates, Lowers Six-Month Rate

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  Published in House and Home on Sunday, February 8th 2026 at 17:24 GMT by The New Zealand Herald
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Auckland, New Zealand - February 8th, 2026 - ASB, one of New Zealand's major banks, has recalibrated its mortgage rate strategy, increasing rates on longer-term fixed mortgages while simultaneously lowering its six-month rate. This move reflects a growing consensus among economists and financial institutions that the Reserve Bank of New Zealand (RBNZ) is likely to maintain its current interest rate for a longer period, pushing out expectations for potential rate cuts into late 2026.

The bank announced increases across its one, two, three, four, and five-year fixed rates, with the most significant rise of 15 basis points impacting the five-year rate. Conversely, the six-month fixed rate experienced a 20 basis point decrease. This dual action signals a nuanced approach to navigating the current economic climate and anticipating future RBNZ policy.

Specifically, ASB's revised rates now stand at 5.55% for one-year terms, 5.50% for two and three-year terms, and also 5.50% for four-year terms. The five-year fixed rate has increased to 5.55%. The six-month rate, however, has fallen to 4.80% - a reduction from its previous 5.00%.

Mark Godson, ASB's Head of Retail, explained the rationale behind these adjustments, stating that the changes are a direct response to the evolving economic outlook and shifts in market pricing. He emphasized that the bank anticipates the RBNZ will likely hold the Official Cash Rate (OCR) steady for an extended period. While acknowledging the eventual expectation of rate decreases, Godson believes these cuts are now more probable in the latter half of 2026, a delay compared to previous forecasts.

"We've made some adjustments to our fixed rate pricing to better reflect our view of the economic outlook and how market pricing has evolved," Godson stated. "The changes reflect a view that the Reserve Bank is likely to hold the OCR steady for a while longer. While we expect the Reserve Bank will eventually lower the official cash rate, we believe it is more likely to be later in 2026 than previously thought."

Broader Market Trends and Economic Implications

ASB's rate adjustments aren't occurring in isolation. Westpac also recently increased its long-term fixed rates, suggesting a broader trend among lenders. This coordinated movement hints at a collective reassessment of economic forecasts and a cautious approach to mortgage pricing.

The delay in anticipated RBNZ rate cuts is rooted in several factors. Persistent inflation, although moderating, remains above the RBNZ's target range of 1-3%. While New Zealand has avoided a deep recession, economic growth has been sluggish, creating a complex situation for policymakers. The RBNZ is likely hesitant to cut rates prematurely, fearing a resurgence of inflationary pressures. Stronger-than-expected labor market data also provides the RBNZ with breathing room to maintain its current stance.

The increase in longer-term fixed rates is likely to dampen enthusiasm in the housing market. Higher rates make borrowing more expensive, potentially cooling demand and slowing house price growth. This could have a knock-on effect on construction activity and related industries.

Conversely, the reduction in the six-month rate offers some relief to borrowers seeking shorter-term financing. This could appeal to those anticipating rate cuts in the near future or those who prefer the flexibility of a shorter fixed term. However, the differential between short-term and long-term rates is widening, presenting a challenge for borrowers deciding how to structure their mortgages.

What This Means for Borrowers

For homeowners and prospective buyers, ASB's actions underscore the importance of carefully considering their options and seeking professional financial advice. Locking in a long-term fixed rate provides certainty but may come at a higher cost if the RBNZ eventually lowers rates significantly. A shorter-term fixed rate offers the potential to benefit from future rate cuts but exposes borrowers to the risk of rates rising.

Borrowers should assess their individual financial circumstances, risk tolerance, and long-term goals before making a decision. The current environment demands a proactive and informed approach to mortgage management. Furthermore, monitoring economic indicators and RBNZ communications will be crucial in navigating the evolving interest rate landscape. The expectation of delayed rate cuts is likely to keep mortgage rates elevated for a longer period, requiring borrowers to adapt and plan accordingly.