Homeowners making mortgage decisions should fix now for three- or five-year terms, or move to the floating rate, ABN Amro Craigs broker Peter McIntyre said yesterday.
Longer-term fixed mortgage rates were continuing to rise, with the ASB lifting its rates for terms of three years or more.
ASB raised its three-year rate by 0.35% to 6.5%, its four-year rate by 0.6% to 7.15%, and its five-year rate by 0.5% to 7.25%.
TSB also raised some rates, taking the four-year rate to 7.15% and the five-year rate to 7.25%.
The major banks have been lifting their longer-term rates during the past few weeks, with ANZ-National on Tuesday taking its three-year rate from 5.99% to 6.15%, the four-year rate from 6.4% to 6.55%, and the five-year rate from 6.5% to 6.75%.
Mr McIntyre said other banks would no doubt soon follow ASB's move, as wholesale rates and bond yields pressed higher.
"United State Treasury [bill] yields have jumped, and that has flowed through to our interest rates. It's been compounded by a corresponding jump in our dollar.
"This is showing that interest rates have been too low over the three- to five-year periods. There is a lot of pressure on three to five years, as much of the company debt has been set at those rates.
"While the longer-term fixed rates were expected to rise as part of a return to the normal yield curve, there would be downward pressure on the floating rate as the Reserve Bank looked to cut another 0.5% off the official cash rate this year, to take it to 2.5%, he said.
"If other banks followed suit as expected, the way people thought about their mortgage rollover strategies could be substantially changed. Higher long-term interest rates reflect the risk premium in that market.
"The short end of the curve will be coming back and the longer end will be rising. In lay terms, that means inflation will be a problem again in two to three years."
That would worry the Reserve Bank, which would not have expected the public-private partnerships being introduced by the US Treasury to create so much havoc in New Zealand.
There was growing demand for US Treasury bills, and interest in yesterday's auction for New Zealand government debt was strong.
Three tranches of $50 million were put out for tender, with demand of between $140 million and $180 million bidding for each.
But the Government might have been disappointed with the yields, given the strong demand.
The 2011 bonds closed at 4.03%, up from the current 3.81%; 2013 closed at 4.57%, up from 4.35% and the 2017 closed at 5.4%, up from 5.15%.
At a glance
•Long-term interest rates rising.
•Short-term rates falling.
•US bail-out driving rates.
•Demand high for Government bonds.
•Time to fix rates.
