ANZ lifts fixed mortgage rates as the Middle East conflict pushes up bank funding costs

ANZ, the country’s largest home lender, is lifting every fixed home loan rate it offers from six months out to three years, in increases of between 10 and 26 basis points. The changes take effect on Thursday and follow a similar move by Westpac a week earlier, which means both of New Zealand’s two biggest banks have now put fixed mortgage rates up inside a fortnight.

ANZ’s six month special rate rises 10 basis points to 4.79 percent. The one year rate goes up 20 basis points to 4.99 percent, the 18 month rate rises 26 basis points to 5.45 percent, the two year rate is up 20 basis points to 5.49 percent and the three year rate lifts 10 basis points to 5.59 percent. The four and five year rates stay at 6.39 percent and 6.49 percent. The moves are set out in interest.co.nz’s rundown of the changes, which notes that in most cases ANZ has gone further than Westpac did.

The bank is blaming the cost of money it borrows offshore rather than anything happening in the domestic economy. ANZ’s managing director for personal banking, Grant Knuckey, said wholesale rates had “increased significantly in recent months amid uncertainty surrounding the conflict in the Middle East, making offshore funding more expensive”. He added that “when global uncertainty pushes up those funding costs it puts upward pressure on lending interest rates including home loans”, in comments reported by 1News.

Westpac made the same argument when it moved first on 27 July. Its one year advertised special went up 20 basis points to 4.99 percent, its 18 month and two year rates rose 26 basis points to 5.35 percent and 5.45 percent, and its three year rate rose a smaller 6 basis points. Helen Ryder, Westpac New Zealand’s managing director of consumer banking and wealth, said “re-escalating tensions in the Middle East have once again driven up wholesale interest rates, causing bank funding costs to rise”. She also said “Most wholesale interest rates are now over 0.30% higher than they were a month ago, so with today’s changes we are passing on some of those higher costs but also absorbing some.”

The wholesale market Ryder is referring to is the swap market, where banks lock in the cost of funding a fixed rate loan. The one year swap rate sat a little above 3 percent at the start of July and had climbed to 3.43 percent by the end of the month. The two year rate rose from 3.36 percent to 3.7 percent over the same weeks. Those rates have not come back down since, and interest.co.nz notes they have stayed sticky at the higher levels they reached in mid July, held there by benchmark rates offshore. Banks fund themselves partly from those markets and partly from customer deposits, which is why term deposit rates are moving at the same time. ANZ is lifting its term deposit rates by between 10 and 30 basis points from Wednesday, with the largest increases going on the 18 month and two year terms.

What makes this awkward for borrowers is that the offshore pressure is arriving on top of a domestic one. The Reserve Bank lifted the Official Cash Rate by 25 basis points to 2.50 percent on 8 July, its first increase since May 2023, after annual inflation reached 4.1 percent in the June quarter. Petrol alone, up 27.5 percent over the year, accounted for close to a quarter of that annual increase. The same conflict is therefore showing up twice in household budgets, once at the pump and through the inflation figures that the Reserve Bank responds to, and again in the price banks pay for the money they lend on.

For a household coming off a fixed term, the numbers are not enormous but they are not trivial either. On a $600,000 mortgage over 30 years, refixing for a year at 4.99 percent rather than the 4.79 percent that was available a fortnight ago costs about $73 more a month, or roughly $875 over the year. Most New Zealand mortgages are fixed for a year or two rather than for the life of the loan, so the effect washes through the country steadily as loans come up for repricing rather than landing all at once. Anyone whose fixed term expires in the next few months will be refixing into a market that is now moving in the opposite direction to the one most borrowers had been counting on.

The housing market was already flat before any of this. Barfoot & Thompson released its July figures for Auckland on Tuesday, showing 845 residential sales for the month, down from 890 in June and well short of the 957 sold in July last year. The median selling price was $945,000, up $5,000 on June but $5,000 below where it sat a year ago. The average price was $1,102,469, almost exactly where it was in July 2025. New listings rose 6.4 percent to 1,551 and the agency had 5,943 properties on its books at the end of the month. “The Auckland housing market was in hibernation in July,” managing director Peter Thompson said in the report, adding that the market “has just ticked over quietly during the winter months and has resisted drifting down while uncertainty around the Middle East and an economic recovery have dominated the headlines”. The figures are covered in more detail by interest.co.nz.

A market that has spent the winter going sideways is not one that absorbs higher borrowing costs easily. Cheaper mortgages have been the main thing working in favour of buyers over the past two years, and that support is now being withdrawn from two directions at once. Sellers are still listing, with new listings up on June, so the stock of unsold houses is not clearing quickly.

The Reserve Bank signalled in July that further increases were likely at coming meetings, and bank economists have been revising their forecasts upwards since. Statistics New Zealand publishes labour market figures for the June quarter on Wednesday, and most bank economists expect unemployment to have risen to 5.4 or 5.5 percent, which would be the highest reading since the years after the global financial crisis. A weakening job market would normally argue for cheaper money rather than dearer, but the inflation half of the Reserve Bank’s mandate has pulled the other way, and the banks’ own funding costs are now doing the same thing without waiting for a decision from Wellington.

Are you due to refix a mortgage in the next few months, and has this changed how long you plan to fix for? Tell us in the comments below.

This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂