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We look at how mortgage pricing compares with what Aussies pay for the same sort of loans. We find that 'advantages' we noted 18 months ago have disappeared as banks 'protect margins'

We look at how mortgage pricing compares with what Aussies pay for the same sort of loans. We find that 'advantages' we noted 18 months ago have disappeared as banks 'protect margins'

Local news has plenty of items about rising interest rates, especially those that affect home owners.

Similarly in Australia, rising rates there are making the headlines too.

The expectation is that rising rates over the ditch may bring financial stress sooner than here. That makes it 'news'.

So it is time to compare rates between countries, especially for mortgage borrowers.

What this shows is that New Zealanders pay a premium interest rate for all terms. But the premium is smallest in the shorter terms.

Wholesale interest rates are lower in Australia, so a premium for New Zealand borrowing should not be surprising.

These wholesale costings show the premium is about +20 bps at the short end, and about +30 bps at the long end.

Aussies pay about 5.30% for floating rate mortgages whereas Kiwis pay about 5.60%. But the 90 day bank bill rate is only +20 bps higher here than there. That reinforces the idea that floating rate margins are better for these banks on this side of the ditch. It may also bolster the motivation for Kiwis to go for fixed terms, which we do far more freely that the Aussies do.

For a two year fixed rate, we pay about 4.70% on average, a +2.28% margin to swap.

If you were a borrower in Australia, that 2 year fixed would cost about 4.10% on average, a +2.06% margin to swap.

It might be fair to assume banks on this side of the ditch operate with slightly fatter margins than their parents do. Certainly, the profit results and other international benchmarking suggests the same.

In New Zealand there are about nine or ten active banks seeking mortgage business, but 96% of all business is being done by just five of them.

There are far more options in Australia with well over 25 institutions with a home loan book over AU$1 bln, and the four majors with 'only' an 83% market share. But the sheer scale means that 17% not with the four pillar banks is a market of $261 bln, itself larger than the whole New Zealand home loan market.

We pay about +0.25% for being in a smaller market (the extra margin to swap), and another +0.30% for being in a less competitive market.

Here is the current comparison:

Residential mortgage interest rates
January 19, 2017 Floating 1 year 2 years 3 years 4 years 5 years
New Zealand % % % % % %
   ANZ 5.69 4.45 4.75 5.49 5.70 5.85
   ASB 5.65 4.49 4.79 5.09 5.49 5.69
   BNZ 5.64 4.49 4.79 5.09 5.69 5.79
   HSBC 5.59 4.19 4.39 4.69 5.09 5.29
   Kiwibank 5.40 4.35 4.54 4.99 5.45 5.55
   Westpac 5.65 4.49 4.79 5.09 5.69 5.49
NZ average 5.60 4.41 4.68 5.07 5.52 5.61
   Swap rates 1.99* 2.15 2.40 2.62 2.80 2.94
   margin to swap 3.61 2.26 2.28 2.45 2.72 2.67
             
Australia            
   ANZ 5.25 4.54 4.13 4.34 4.64 4.74
   CBA (ASB's parent) 5.22 4.54 4.14 4.24 4.54 4.74
   HSBC 5.23 3.85 3.95 4.19 4.49 4.59
   NAB (BNZ's parent) 5.55 3.99 4.08 4.19 4.69 4.69
   Suncorp 5.40 4.19 4.04 4.04   4.64
   Westpac 5.29 4.59 4.19 4.29 4.79 4.59
AU average 5.32 4.28 4.09 4.22 4.63 4.67
   Swap rates 1.78* 1.86 2.03 2.18 2.51 2.61
   margin to swap 3.54 2.42 2.06 2.04 2.12 2.06
   * 90 day bank bill rate            
             
differential (NZ-AU) +0.28 +0.13 +0.59 +0.86 +0.89 +0.94

These are the carded rate differentials - negotiation can lower your actual rates, and your effective costs will be affected by incentives and fees. (Home loan fees are more pervasive in Australia, so much so that they require banks to declare "comparison rates". The above table does not account for those costs.)

We did a similar comparison in February 2015. And another in November 2015.

In the time since we last explored these comparatives, margins to swap have moved against New Zealand borrowers.

  Floating 1 year 2 years 3 years 4 years 5 years
  % % % % % %
NZ margin to swap +3.61 +2.26 +2.28 +2.45 +2.72 +2.67
AU margin to swap +3.54 +2.42 +2.06 +2.04 +2.12 +2.06
             
Jan-17 differential (NZ-AU) +0.28 +0.13 +0.59 +0.86 +0.89 +0.94
Aug-15 differential (NZ-AU) +0.69 +0.26 +0.16 +0.56 +0.78 +0.83
Feb-15 differential (NZ-AU) +1.02 +1.06 +0.92 +1.00 +1.01 +1.11

 

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24 Comments

So has there been any 'official' explanation as to why the sudden increase in mortgage rates? I have my theory as to why its happening but would love to know what explanations they give for the rate rises, since there has been predictions that this will be a continuing trend.

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Swap rates in Aus look lower across the board...

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There is a sea of Housing in QLD, New Houses are still attainable for $460AUD, ones complete with pool $580 and they still have new build incentives for 1st home buyers. 15,000 new homes are being built in Kawana and Caloundra alone. So not only is a house cheaper the finance is also. Mass migration of the youth to Australia is on the cards as home ownership rates in NZ are at the lowest ever and falling.

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Sydney and Melbourne with Auckland are the cities to live in with resulting capital gain.
Other outback areas in Aus you can pick up cheap brick n tiles and plenty of them forever cheap.

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Comparing Auckland to Sydney & Melbourne is laughable. Sydney has more people living in it than the entire country of New Zealand.

Auckland is more similar to Adelaide in population size & not to mention the lack of high rise buildings is another thing they have in common too. Auckland needs a major intensification plan.

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Ted Stanton was comparing capital gain so it was comparable. Auckland is New Zealand's Sydney. Better than Sydney actually as it has beautiful beaches that one can enjoy sometimes all by one's self (Whatipu, Kerikeri). Sydney was horribly crowded last time I was there. It's an arid place too, surrounded by parched hills that were once impenetrable. No, the more I think about it Auckland is far superior to Sydney as a place to live.

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Auckland is nothing like Sydney at all it's a poor imitation of Sydney gone horribly wrong. Auckland is more similar to Adelaide than to Sydney.

Auckland is built on a Isthmus that is a volcanic minefield. https://en.wikipedia.org/wiki/Auckland_volcanic_field

Sydney & Melbourne have a Capital Gains Tax which Auckland doesn't have so they aren't comparable.

Data from 2013 ----> "The fact that all kiwi cities seem to be more intensively developed is a clue that its not just Auckland that is different. Demographic figures show that even Hamilton (in New Zealand) has a population density of 2,200 people per square kilometers,higher than Sydney. Really?"

Also according to the same data Christchurch,Wellington,Auckland have a higher density than Sydney,Melbourne,Perth,Brisbane,Adelaide & The Gold Coast.

The only city in the data that had a higher density than Auckland was Toronto.

Are you suggesting Sydney doesn't have beaches you can't enjoy all by one's self? http://www.bestsydneywalks.com/secluded-beaches-sydney/

Last I checked the population density of Australia is (3.16) vs New Zealand (17.57).

33% of the total NZ population living in Auckland vs 20% of the Australian population living in Sydney.

Your comparison of Auckland to Sydney is just as bad as other Kiwis comparing Auckland to being the New York City of NZ. Auckland is a overrated city.

I was born in Western Sydney. Sydney is that much of a Global city that many people from all over the world visit to climb the Harbour bridge & see the Opera House.

Sydney is better than Auckland.

The Blue Mountains which is very diverse in native wildlife & ancient rainforests is only 50km West of Sydney.

A video from the Northern beaches of Sydney with huge amounts of bird life of Lorikeets,Kookaburra & Corella's----> https://www.youtube.com/watch?v=Hg7v2A6H53w

You calling Sydney horribly crowded? Wrong. Auckland---> http://www.cnbc.com/2016/06/20/this-city-is-so-overcrowded-its-paying-p…

Look at the landmass size both cities are built on yet you think Sydney is horribly crowded?

Auckland is crowded with many people living in a single house. South Auckland is known for gang activity among youth in ethnic minority communities. https://www.youtube.com/watch?v=SOWF6eIVqqI

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A lot of those figures are kind of ridiculous. For instance the population density of Australia compared to NZ. Australia is a vast, arid, wasteland that will kill you within hours if you are not careful. It is not densely inhabited because it is uninhabitable. Suitable for atomic bomb testing.
Auckland is densely inhabited because it is highly habitable. We are trying to stop people from coming to Auckland. What does that tell you?
I will admit though that Australia is superior in that it has Bindi Irwin. Would you consider a swap for Lorde and the Topp Twins?

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Wrong again. http://www.geocurrents.info/wp-content/uploads/2012/12/Australia-Climat…

Australia isn't a wasteland with more native parrot species than any other country on Earth with over 50+ parrot species native to Australia. If Australia was a wasteland it would be entirely uninhabitable for human life.

The Daintree Rainforest in Northern Queensland is the world's oldest tropical rainforest, the Daintree rainforest is also home to the earth's largest range of animals and plants.

Australia was once covered entirely in rainforest. Rainforests across Eastern Australia are ancient rainforests dating back to Gondwana. https://en.wikipedia.org/wiki/Gondwana_Rainforests

Australia is the oldest continent on earth. The fossils found in Australia are remains of the earliest life on earth, dating back millions of years. One tree in Australian rainforests dates back to the age of the Dinosaurs.

Australia has some of the oldest and largest tracts of rainforest in the world.

Australia is a megadiverse country. https://en.wikipedia.org/wiki/Megadiverse_countries

Megadiverse countries are a group of countries that harbor the majority of Earth's species and high numbers of endemic species.

Are you forgetting NZ has a super volcano (Lake Taupo) in the North Island overdue to erupt & the Alpine Fault in the South Island with the "big one" earthquake? NZ is a mine field entirely covered in fault lines.

https://en.wikipedia.org/wiki/Taupo_Volcano

The Lake Taupo Super Volcano has produced two of the world’s most violent eruptions in geologically recent times.

When Super Volcano Lake Taupo erupts it will send Toxic Ash across all the Islands of New Zealand & has the power to destroy the entire North Island through an eruption.

The Romans & Chinese once spoke of seeing the sky change color from it which no humans inhabited New Zealand the last time Lake Taupo erupted.

Remember New Zealand was born as a landmass from Volcanoes & Earthquakes rising from the sinking of Zealandia which is currently 95% underwater.

Kill you within hours? Nonsense, I have never been stung by anything worse than a bee. The only people who get killed are mostly people who provoke or mishandle snakes. Snakes are more afraid of humans than vice versa.

Uninhabitable? Aboriginals have inhabited areas you think are uninhabitable for tens of thousands of years. You're misinformed.

66% of the total Australian population lives in just the capital cities. Most of the Australian Coastline on the East Coast is barely inhabited. http://blog.id.com.au/wp-content/uploads/Australia-Population-Grid.jpg

Northeastern Queensland which is highly covered in rainforest is barely inhabited by humans.

Highly habitable? a full-scale eruption of the Auckland volcanic field would be substantial – ranging from pyroclastic surges, earthquakes, lava bombs, ash falls, venting volcanic gas to lava flows. These effects might continue for several months and cause substantial destruction and disruption.

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You're right Australia is a great country with a great heritage and hopefully a great future.

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TV Sports Siphoning

At least AU still has free-to-air sports broadcasting - you can sit down in your armchair and be inspired to greatness in most fields of activity and feel-good

Unless you pay for Sky-TV, you wouldn't know NZ even plays any sport and our future Jack Lovelock's and George Nepia's and Peter Snell's will never arise

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Australia, where there indigenous people go has an absolutely appalling record and it is little better today, but I suppose that is easy for a white supremacist to ignore.

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Kind of hypocritical for Kiwis to go on about Indigenous people in other countries with the appalling record of Maori imprisonment,suicide rates & life expectancy.

A racist law recently was removed in NZ on Maori wardens removing drunk Maori from bars

Maori were beaten in School for speaking their native tongue & Maori were once called "superior savages", Maori women were viewed as "inferior" by Pakeha settlers.

http://www.radionz.co.nz/news/national/294271/maori-women-viewed-as-'in…

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Think you might find we are light years ahead of Australia

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Well New Zealand breached their own treaty with Maori people multiple times through Maori tribal land confiscations. Yet New Zealand jumps on the bandwagon of criticizing Israel over Palestine.

Light years ahead of Australia? 50%+ of the total NZ prison population are Maori, Maori still have very high suicide rates, Life expectancy of Maori is still below Pakeha, Maori are still at the bottom of the median income ladder in New Zealand.

Maori men are dying at a greater rate of prostate cancer than their Pakeha counterparts, Maori are far more likely to get cancer than other Kiwis.

Maori & Pacific Islander kids still getting third world illnesses such as rheumatic heart disease in New Zealand houses which was described as "rampant".

Not to mention the NZ Labour party racially profiling people with Asian surnames for their Housing data is something no Australian party has ever done not even One Nation went that far.

The Whole smugness of New Zealand thinking its light years ahead of Australia is ignorant. Pakeha net-worth gap is massive compared to Asians,Maori & Pacific Islanders in New Zealand.

Across ethnic groups, New Zealanders of European descent were the wealthiest, with an individual median net worth of $114,000.

For Asian New Zealanders, that figure was $33,000, for Māori $23,000, and for Pacific people $12,000.

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This is turning into a pissing contest. Australia has many great positives and in plenty of areas is superior to NZ but Im afraid you are barking up the wrong tree comparing NZ to Australia in relation to treatment of its indigenous peoples. Having worked in remote Aboriginal communities for many years I can assure you it is unlike anything I have seen in a developed country and racism remains rampant.

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Mate you should write a book. Don't forget the chapter about all the animals that are trying to kill you in Australia.

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I trust the bomb testing bit was a joke, it had better be

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No joke: Nuclear weapons tests in Australia

Not joking about Bindi either.

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Pathetic

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Sounds like Christchurch prices. Would be interested to know how many people are making the move south to afford a house. I am one of them and I know many others.

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Nonsense, 31,300 Kiwis moved back to New Zealand from Australia last year. Many Kiwis are also moving back to New Zealand from the UK & elsewhere.

The mass migration of Kiwis to Australia happening again anytime soon is impossible as the mining boom is long gone in Australia. Australia is one quarter away from a economic recession for the first time in 25 years if GDP isn't positive next time.

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Weekend Blow-in Warriors
Depends on how you define mining boom - ripe for the picking
http://www.smh.com.au/nsw/hospitals-pay-6000-for-kiwi-weekend-warriors-…

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And they wonder why rents are going ! they want to slow the housing market .... they run a big risk of collapsing it then their security reduces , they reduce their rating , they get charged more for borrowing ..... it spirals down , hello new recession

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