Effective this morning, ASB has increased a broad range of home loan interest rates from six month to five year terms.
One year and two year rates jump by 36 basis points to 2.55% and 2.95% respectively.
Six month, 18 month, three, four and five year rates increase by 30 basis points to 3.29%, 2.79%, 3.29%, 3.69% and 3.99% respectively.
The hikes represent a major shake-up for the mortgage market which has experienced mostly downward pressure on rates since the Covid crisis, until the past few weeks.
The interest rate increases could mark a turning point for mortgage rates, with other large banks expected to follow.
It comes as the Reserve Bank makes its latest official cash rate announcement this afternoon.
The RBNZ is expected to leave rates as they are, but is tipped to signal plans for rate hikes later this year.
ASB said its decision to raise rates was based on the improving economic outlook, with metrics such as inflation and house prices increasing rapidly as the economy gathers steam.
Craig Sims ASB’s executive general manager of retail banking, said: "The New Zealand economy is proving robust, and the economic outlook has improved. While interest rates are now increasing, they remain at historically low levels.
"We’re mindful that some first home buyers in particular have only ever experienced the current low-rate environment. When we assess a home loan application we use a ‘test rate’ that is substantially higher than current mortgage rates to give customers the confidence they can continue to make payments if rates increase.
"We encourage home lending customers to talk to us about their options, which could include spreading mortgage amounts over different terms to give certainty over time or making extra payments while rates are very low."
ASB has also increased its term deposit rates in line with the mortgage hikes.
The decision to break from the rest of the market and lift rates comes a matter of weeks after it unveiled a 1.79% 'Back My Build' loan product for new builds. The product will remain in place, Sims said.