Another major mortgage lender raises fixed rates, this time the state-owned bank, with rises ranging from +10 to +20 bps

Kiwibank has followed ASB and raised fixed mortgage rates, effective Tuesday, January 10, 2016.

Their changes are across the board and range from +10 to +20 bps.

Their six month fixed rate has become 4.85%, a +10 bps rise.

Their one year fixed 'special' is now 4.35%, and +11 bps rise.

Their two year fixed 'special' is now 4.54%, a rise of +15 bps. They now no longer have this as a market-leading rate for this term, but it is equal with Westpac as the lowest of any of the main banks.

Their 3 year 'special' has been hiked a full +20 bps to 4.95%.

For terms of 4 and 5 years, the rise is +15 bps to 5.45% and 5.55% respectively.

It seems unlikely that they will be the last of the banks to hike home loan rates as the world adjusts to the prospect of higher interest rates.

Update: Kiwibank also raised all its floating rates. See details here.

Today's adjustments don't change who has the leading carded rates for mortgage borrowers. HSBC Premier still leads for a one year term, SBS Bank now has the leading rates for 2 years, and TSB Bank has the market-leading offers for all terms longer.

See all banks' carded, or advertised, home loan rates here.

A snapshot from the key retail banks is:

below 80% LVR  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
  % % % % % %
4.25 4.99 4.59 5.29 5.45 5.60
ASB 4.49 4.65 4.79 5.09 5.49 5.69
4.39 4.99 4.59 4.79 5.45 5.59
Kiwibank 4.35   4.54 4.95 5.45 5.55
Westpac 4.25 4.95 4.54 4.79 5.49 5.39
             
4.39 4.55 4.55 4.89 5.39 5.55
HSBC 4.19 4.29 4.39 4.69 5.09 5.29
HSBC 4.29 4.45 4.39 4.75 5.29 5.45
4.25 4.45 4.49 4.59 4.89 4.99

In addition to the above table, BNZ has a fixed seven year rate of 5.99%. This has not changed today.

TSB Bank offers a fixed ten year rate at 5.75%.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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46 Comments

Excellent! Hopefully this has further impact on decreasing Auckland house prices.

Yes but it will increase rents, no doubt

But as pointed out below for many it will be lower interest rates than two years ago so rents should go down.....

You do realise this isn't about existing borrowing but about new borrowing which makes buying a property with 3% yield make even less sense.

Stop spreading a false narrative

I'm not sure it ever made sense (given that's gross yield before rates, insurance, repairs, time unoccupied) .. unless the next chump buys from you at escalated prices.

Yep that's it mate and what happens when that expectation is gone?

http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

This.

Love his listing "Sorry owner occupiers but the investors need to know that this opportunity is in the grammar zone, (meaning higher rents and raising values in further long term)"

Might be wishful thinking a little, given it's an "urgent sale". The indisputable fact is rent is tied to tenant income and less so to house purchase price so there's a tipping point and little opportunity to price it too far up. Rent increases are inevitable, but it's the quantum that's up for debate.

It's not exactly being offered at a bargain basement price though. I reckon the CV is around 390K. They don't give the exact unit number which is interesting nor do they give the CV in the listing. This is one of the better ones in the complex I think which means the others aren't as nice which is not always a good thing.

It is unit 1H and Homes.co has it at 550K mid range price. Last sold in 2014 for 395K. The CV is 370K. Others in the block down as low as 395K so, yes, it is probably one of the better ones but in general terms the area and outlook are not great.

So even if it's sold for 550K, the owners would have made 120K (I'm taking a bit off for renovations etc)... that's brilliant... you'd be on a salary of 90k a year to take that kind of money home... bet they didn't work forty hours a week for two years to do do it up...

There's a narrative - I thought it was all just bull shit being spread as sound investment advice. I do understand that the current situation may in the future put some people in a difficult position. Too many people think tactically (i.e. in the shorter term) rather than strategically (i.e. the long term).

The sad thing is that it is the lack of action by the government that allowed house prices to increase so much. So at the end of the day, there are going to be people that will end up paying. Interest rates were at unsustainable low levels for several years, so it was never going to last, and people who borrowed should never have borrowed up to their limit they could afford to service, and not expect rates to go up much.

Premature interpretation, remember interest rates are at record lows around 4% also last year the market tanked in December and January and then suprised all the experts by rocketing up in February and March.

By virtue of rising, I am not sure you can say they are at 'record lows' nor can you say 'around 4%' as most terms are now closer to or above 5.

Yes but the inventory was a lot lower last year - that does make a difference. A sale requires a willing buyer and a willing seller , if there are slow sales and there is plenty of inventory it most likely means that the expectations of the buyer and seller differ. The question is who blinks first. If inventory continues to rise (as well as interest rates) my bet is on the seller. Also whoever mentions a price first looses.

I question the use of the words "hike" and "hiked". It implies an excessive and surprising rise in price which this clearly is not. The rates yesterday were historically low for NZ and even today remain very low.

The Kiwibank rates went up between 2.1 and 4.2%. If rent went up that much it would be reported that rents are stagnant.

funny you say that cause just today on TV3 news they made a big deal about how rents are rising and followed someone who had to move out because the rent had increased twice in 3 years! And how much did they say they had risen? why your 4% stagnation.

hopefully deposit rates will follow

Hopefully oncall deposit rates will follow. Instead they have plunged over the last year, which I believe is to try and get people to put their money into term deposits where the money is locked in. Shorter Term deposits were previously no better than the oncall rates. Now oncall savers have to move their money into term deposits , or miss out

Limited impact. E.g. If a borrower is coming off a 2 year fixed rate this year, then a new 2 or 1 year rate is still likely to be lower.

I don't know if you realise this yet, but everyone is not miraculously on a soon expiring 2 year fixed rate...

Majority of mortgage borrowers are on terms of 2 years or less, or floating. So a good proportion overall will refix in 2017, & so likely to see a reduction or similar rate.

It raises 2 questions

1) Why are they doing this now , when the OCR and deposit rates are so low ( are they in need of Capital ?)
and
2) Are they offering incentives to savers to deposit cash with them ?

I'd like to see higher rates for "investors" like they have in Oz.

Uninterested, why should property investors pay higher interest rates than private home owners?
Investors are generally a safer risk to the Banks than home owners who use for their own occupation, so on that basis the investors should have a cheaper rate!
Agree with you Zachary that the word "hike" is a bit too dramatic when the rates are going up ever so slowly and will probably have little effect on investors at the moment as the rates are lower than what they are probably already on.
Can't see interest rates rising high enough to bother too many and if they did rise by plenty then it will stuff many and the country will be stuffed anyway and effect every single person in NZ.
So,the doomsayers had better be careful wishing that the interest rates go so high as to crash the NZ housing market, and if it did happen then the NOn house owners wouldn't be able to buy anyway as they would be out of a job and couldn't borrow!

Actually the RBNZ disagree. Risk ratings on owner occupied houses are lower than investor loans - why? Perhaps because people are less likely to walk away when they live there. Time and time again around the world these have been shown to be riskier assets.

RBNZ require more capital to be held for these loans, ergo, the argument they should pay more.

http://www.rbnz.govt.nz/regulation-and-supervision/banks/prudential-requ...

"The rationale for higher capital requirements for loans secured by investment property is that the risk profile of loans to residential property investors differs from those to owner-occupiers"

How many NZ property investors have interest only loans? I have a friend with a few.

Could make sense if you got in and out at the right time as we have had record house inflation over the last 5 years but how many will be too greedy and leave the get out too late. As they say profit on paper is not a profit until traded for hard cash

All the economists are saying it's going to be another year of house prices growth, you'd be crazy to sell now.

And you believe economists........

Economics is a religion, not a science.

Who is the deity that we worship?

99% of them worship Milton Friedman. A rare living deity.

Milton Friedman - "A rare living deity".
Ahh...That bro is well dead..

He lives on in neoliberalism. Although neoliberalism has taken a strange direction that doesn't really match up completely with his concepts.

Really? How so?

I wish I had a little more time to pull up a better discussion (as I hate linking blogs). This does contain a relevant quote from Milton Friedman.

https://okieblog.wordpress.com/2012/02/20/milton-friedman-on-neoliberali...

LOL some of us would be able to buy as many houses as we need, lots of us learned a long time ago leverage is a dangerous practice if you don't plain for the downturns, the last few years have a lot of newbies lined up to learn the lesson the hard way

Investment properties carry the same risk as any other business. If you owned a business outside of property you would be amazed at the tucking the banks would give you. Try closer to 10% for a lot of SME's. Why should property be any different. I can only see banks squeezing harder.

Risk is determined by the investors financial position that is their equity and income to expenditure.
If they are a true investor then they should be positively geared overall on their portfolio otherwise they are a speculator.
If the Bank wasnt happy with the situation then they shouldn't be lending to that party.
An investor can always sell their properties if they need to but an owner occupier needs somewhere to live but can always lose their job and are more vulnerable

Actually the real risk is of people losing their jobs and being unable to pay rent or their mortgage. There's a difference between the actual risk and an evaluation method.

The banks may be happy with that method of evaluation but that is because they are ignorant with respect to risk analysis. The people employed at banks know surprisingly little if you take the time to talk to them.

If an economic event occurs that takes us back to 10-11% unemployment you'd find that things would get very tight for our banks.

"If they are a true investor then they should be positively geared overall on their portfolio otherwise they are a speculator."

Respect!. This view sets you apart from the position of most newbies to residential property "investment".

Overall an important point. I've met many people who negatively geared and then later ended up selling their property for no capital gain. They did a good job of losing money.

had family that did that started out with a couple of rentals positive geared over 50% LVR , but got talked into taking out more loans and going to neg gearing by the friendly bank manager and accountant so loaded up and brought mutilpule properties.
they did not listen to me instead took advice from those with a vested interest in those that were making money of them, and i warned them in 2007 all was not well prepare for the downturn
problem was 2008 hit circumstances changed so they needed to sell to move on, ended up walking away with very little compared to where they started.
as for me 2008/2009 was a golden period and set me up

It's rather unfortunate but many people do not understand the benefits of operating as a business, and not being over-leveraged. In fact it wasn't long ago that commercial lending was carried out in the same irresponsible way.

I am out of the market for now and will be taking up my rents next quarter to offset costs. Being election time soon, cant really trust what might change and more importantly rates going up means the capital gains will slow down as demand will dampen.
Too many uncertainties but that also means FHB should be cautious and not jump in that investors have stepped away.