The strategy of hiking floating mortgage rates in small regular increments continues with another major adding +9 bps to its rates. The separation from official and wholesale rates widens

Westpac has raised its floating rates by +9 bps to 5.84%.

This pushes them up to having the second highest floating rate in the market, behind BNZ's 5.90%.

The last time they raised this rate was on February 28, 2017 when the hiked it by +10 bps.

There is now a very wide 35 bps difference from the highest rate in the market (BNZ) and the lowest (Kiwibank). It is unusual for pricing among home loan rivals to be this wide.

Westpac's action today fits the recent behaviour change by banks of pushing though minor rate changes on a regular basis. It is a strategy adopted by most banks and is an effective way to avoid customer backlash.

The latest rate change takes the Westpac rate back to almost the same level it was on December 11, 2015. However, in that time the RBNZ OCR has fallen from 2.50% to 1.75%, or by -75 bps.

And over the same period, the 90 day bank bill rate has fallen from 2.75% to 1.99% today, a drop of -76 bps. The one year swap rate is -63 bps lower. The one year term deposit rate is only -16 bps lower however.

Overall, banks have $50.7 bln on floating rate terms.

Westpac has made equivalent changes for its Choices Floating, Choices Everyday, and Choices Offset accounts.

For perspective, here is the recent change history for Westpac's floating rate product:

Westpac change history Change Floating
  % %
Start of 2016   5.85
March 10, 2016 (the -25 bps OCR reduction) 0.00 5.85
March 11, 2016 -0.10 5.75
August 12, 2016  -0.10 5.65
August 16, 2016 (the -25 bps OCR reduction) 0.00 5.65
November 22, 2016 (the -25 bps OCR reduction) 0.00 5.65
March 1, 2017 +0.10 5.75
April 6, 2017 +0.09 5.84

Westpac's rate changes are effective for new customers on 6 April 2017, and for existing customers on 26 April 2017.

Here is a snapshot of the current floating rates by the key retail banks and their recent change history:

below 80% LVR as at
Dec 31, 16
as at
Jan 31, 17
as at
Feb 28, 17
as at
Mar 31, 17
as at
Apr 6, 17
        %  
5.59 5.69 5.69 5.79 5.79
ASB 5.65 5.80 5.80 5.80 5.80
5.64 5.79 5.79 5.90 5.90
Kiwibank 5.25 5.40 5.40 5.55 5.55
Westpac 5.65 5.65 5.65 5.75 5.84
           
5.55 5.55 5.55 5.65 5.65
HSBC 5.59 5.59 5.59 5.59 5.59
HSBC 5.59 5.54 5.54 5.79 5.79
5.54 5.54 5.54 5.65 5.65

Westpac has not made term deposit rate changes at this time.

All current mortgage rates are here.

All current term deposit rates are here and here.

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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6 Comments

The RBNZ needs to investigate if the rate rises are justified or just price gourging. I think they need to ask the bank to demonstrate why cost of funding has gone up and why is there no corresponding increase in term deposit rates in NZ if they are sourcing the funding locally. As APRA and politicians become more concerned and put banks under scrutiny in Australia, we can expect them to try to increase profits in NZ at the cost of Kiwis. There does not appear to be any justification for these increases, the banks are having a field day at the cost of ineffective Reserve Bank and government oversight and all of us pay the price unfortunately in some way or the other.

Don't think that is a priority for the RBNZ at the moment!!! The housing bubble and financial risk as a consequence of it popping, is more serious, than the banks pushing up rates, which is actually doing the RBNZ a favour, as its hands are tied from pushing up the OCR, due to low inflation!!!

how much is due to falling credit growth and increased capital requirements forcing banks to widen margins to keep shareholders happy

death by a thousand cuts hikes.

Flat yield curve. Is there uncertainty which way things will go?

Still baffled at why all banks rates are so high. Particularly fixes rates. When you look at the swap rates. They have a way fatter margin now than they had 5 to 6 months ago. Where the swap rates are about the same. By near half a percent