BNZ raises mortgage rates for four fixed terms, pushing parts of their rate card to the highest levels of any bank, and pushing the five year rate over 6% for first time in 23 months

BNZ has raised some fixed carded mortgage rates.

These changes are effective today (January 31, 2017).

Their six month fixed rate is now 5.35%, a rise of +10 bps.

Their one year 'special' rate is also up +10 bps and now at 4.59%.

They also changed some of their longer term fixed rate offers. Their four year rate is up +20 bps to 5.89%. This is the highest in the market for a four year term.

And they have raised their five year rate to 6.09%, a +30 bps hike and also the highest in the market for that term.

The last time we saw a five year mortgage rate starting with a six was back in February 2015 when both BNZ and TSB had such rates.

BNZ also have a seven year fixed rate offer at 6.15%, but that is unchanged in this announcement.

There were no equivalent term deposit rate changes made at this time

Wholesale money costs are rising and putting margin pressure of banks. The margin pressure banks claim is mostly real.

Today's changes do not alter who has the leading carded rates for mortgage borrowers. HSBC Premier has the market leading position for a one and two year terms on its own now, TSB Bank has the market-leading offers for 3 and 5 year terms with HSBC.

TSB Bank now has the next best one year fixed rate offer.

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 
  % % % % % %
4.45 5.05 4.75 5.49 5.70 5.85
ASB 4.59 4.75 4.79 5.09 5.49 5.69
4.59 5.05 4.79 5.09 5.89 6.09
Kiwibank 4.35   4.65 5.05 5.55 5.65
Westpac 4.49 5.05 4.79 5.09 5.69 5.49
             
4.55 4.70 4.85 5.15 5.55 5.65
HSBC 4.19 4.29 4.39 4.69 5.09 5.29
HSBC 4.45 4.75 475 5.09 5.45 5.69
4.25 4.45 4.49 4.69 5.10 5.29

In addition to the above table, BNZ has a fixed seven year rate which is 6.15%.

TSB Bank has a ten year fixed rate of 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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33 Comments

Uh-oh, "THE MAN 2"'s house of reason just started burning down...

It's OK mate, just keep repeating your mantra back to yourself ad nauseum....
"I don't believe rates will go over 6 per cent for a very long time if ever."
"I don't believe rates will go over 6 per cent for a very long time if ever."
"I don't believe rates will go over 6 per cent for a very long time if ever."

It'll all be OK.

Don't know "The Man 2" but he might not be too worried, as I have been recently offered 4.75% for that same 5 year term

really? 5yrs at 4.75%? By who? Seems well out of market, so you should probably take it since it's lower than the average 2 year rate across the majors. Unless of course you want to break early or you mean 5.75%, in which case, ho-hum ;)

Don't know who he's with, but we've got a 3 year fixed rate on 4.65% with a cash incentive recently (settles next week). Sadly we were about 7 days too late to get the 3 year fixed rate at 4.39% with the same cash incentive...

Are there any charts plotting rates from all the bank and how they are tracking over the last several years?

On the competitor :) mortgagerates.co.nz

Sad day for anyone not on the property ladder. Sure house prices may level out. But now you're going to pay more in interest.

If interest rates keep going up house prices will fall.

It's a sad day for those burdened with large amounts of debt.

Where is Ted Stanton! he will fix it for you, Just hang on. the Chinese will be here in a few days with big suitcases of money.

Of course it is a plan by the Banks to get people to fix by scaring them.
When the 2 year rates are over 6 over cent I will admit I am wrong, until such time!
Banks are gauging
You would be silly to lock in long term as if rates do climb dramatically everyone in business will be knackered

Rates are still well under what they were when I fixed nearly 2 years ago

This would contradict your beliefs RE profit gouging...

http://www.interest.co.nz/news/85735/inflation-asb-economists-think-rbnz...

If the housing market does take a significant hit the banks will need to lower their rates, just going off my experience of the GFC in the UK.

At the moment the UK housing market is doing quite well and if you look at their mortgage rates for lender they're less than half the cost of rates here!

As an example HSBC's standard 5 year fixed at 80% loan to value in the UK is: 2.09%.

HSBC's standard 5 year fixed at 80% loan to value here in NZ is: 5.49%
https://www.hsbc.co.uk/1/2/mortgages/products?pcode=A0040480980000000000...

Obviously NZ is viewed as extreme high risk in comparison the the UK for mortgage loans.

Why would rates need to come down in that scenario?

RE HSBC - Id hate to be saver in the UK then!! What's their 5yr TD rate? Also I see they charge you ~$NZD1700 to book in that 2.09%! Ouch.

In the UK after the GFC, the banks had to lower their rates due to the Bank of England lowering its rates (OCR) although the banks also had to be competitive with one another to allow people to borrow and to keep economy going.

Unfortunately NZ has little control over the majority of the mortgage lenders here (Mainly Ozzy banks) so it doesn't really matter too much if NZ increases or decreases it's OCR rates as it seems to have very little impact.

Though the reason why I think that the banks will start to lower their rates again (In less than six months), is that it stands to reason that the NZ housing market is likely to collapse if they keep the rates high.

When you say "lower their rates" do you mean reduce their margin? What if borrowing costs continue to rise and they can't?

The banks will take a much bigger hit if most of their customers end up defaulting on their mortgage payments due to rates being far too high with them having taken on large amounts of debt. Even if they are able to make their mortgage payments they may have problems renewing their mortgages if property prices fall too quickly, this leads to "negative equity'.

Negative equity was a huge problem during the GFC, and high rates caused a lot of over stretched home owners started to default on their payment (Those on variable rates), resulting bank repossessions.

I think banks would prefer to trim their margins for a while and lower rates rather than see a housing market collapse (Of course this works in tandem with the OCR rate).

Then you must be picking a fall of 20% or more, otherwise it is not the bank taking any hit apart from lower income which they will mitigate with down sizing of staff and branches

Quite possibly yes. If you think about it, really property prices for Auckland realistically need to be around the 500k to 600k to be affordable for most Kiwi buyers and even to be commercially viable for most local Investors.

Now that Overseas Investors have been shut out by their own Government and we have no idea how long for, this year could be a very bump ride.

CJ099 are you predicting a 40% drop in prices?

Anything could happen, currently prices are starting to drop in Auckland.

I see that the BoE cash rate is 0.25% and flooded with cheap cash from QE, well under the RBNZ OCR of 1.75%. I'm not sure depositors would be keen for an OCR that low!

They aren't, so many get a rental to try earn something. Which props up the housing market. Can rates stay low forever though?

Nice theory but it may not be something they control. As David mentioned the other day some of the sources of funding for the Australian banks have dried up. Interest rates are slowly rising on the wholesale market and other factors which the banks don't control (the main one here I think is Trump) could have an unknown impact. You are gambling on something that neither you nor the banks control. You may get lucky - you may not.

I'm with CJ099 and I have just renewed a loan for 1 year at 4.15% because I don't believe that most economies are strong enough to keep raising interest rates (I know I'm in the minority to believe this).

Yes I agree with you that it's probably wise to move on to fixed rates at the moment (I've moved mine as well).

There's so may unknowns out there at the moment. And we've already witnessed big changes with the changes in the market with the new political climate. Just wait until Trump starts to weigh in on China, I'm already seeing lots of 'Overseas Investor' sales on Trademe along with 'Urgent sales'.

So wise not to take any big risks at the moment.

While I agree there are big risks out there , I think the world economy is stronger than most believe - it keeps popping up surprises ( an example of that is how well the UK economy has held up despite the repent the end is nigh comments). I think the world economy is slowly pulling itself out of the hole it has dug. New Zealand is certainly doing well and inflation seems to be returning. How many people were saying inflation is dead, interest rates will stay low etc, etc. In the end all I am saying is that no one has any idea and be prepared for some surprises. I make a decision based on what I think is the best today but in the back of my mind I am always aware that things are constantly changing for the better or the worse.

As an aside I saw a hoarding for a mortgagee sale for a house in Memorial Ave , Christchurch today - one of the more affluent parts of the city.

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

( and there do seem to be a few in Christchurch at the moment).

I think it's getting more difficult to import deflation enough to kept the CPI low.

With respect to Christchurch it feels like the economy has shrunk since I was there previously. If people lose jobs because there's less money spent there then there's going to be a lot more mortgagee sales.

Yes very quiet . Went for a walk around a few blocks as you do. I do this twice a week but not since Xmas
Normally I see about 15-20 for sale signs , today I only saw 1- an auction on the 9th Feb.
Don't know if that is good or bad, defiantly not normal, thoughts ??

dp

It's time to look outside the main Banks who are behaving in a cartel like manner, look at HSBC or TSB's rates

IDK I think rates will keep rising mostly because of the FED raising rates

https://www.youtube.com/watch?v=jUN0R5A_5RE
Richard Koo simplifies the economic crisis. He discusses interest rates, monetary and fiscal policy.

When will NZ'ers get it into their heads that our home loan rates are much less a factor of the OCR and more a factor of WHOLESALE interest rates (especially for Fixed terms 2 years and over). This is where the costs for banks to borrow from offshore have been slowly increasing since October 2016. If I was borrowing now I would be seriously looking at TSB's 10 year Fixed rate I think. Fortunately we did Fix our loans in Aug/Sept last year so we get some reprieve from rate increases for a few years at least.