ASB cuts two key fixed mortgage rates, the first reductions of fixed rates for terms longer than one year by a major bank in 2017

ASB has cut rates for two fixed mortgage terms.

Their eighteen month fixed rate has been reduced by -5 bps to 4.70% and their two year fixed rate has also been reduced by -5 bps to 4.74%.

These are the changes for their 'specials' - similar reductions have been made for their equivalent standard rates.

The changes make them the leading market rates, except for the offers from HSBC.

These changes also come just after Westpac raised its floating rate by +9 bps to 5.84%.

And on April 3, Kiwibank raised its one year 'special' by +10 bps to 4.69%.

This ASB move may well signal a change of direction for home loan rate movements.

(There was a brief reduction by BNZ in their one year rate from 4.49% to 4.39% on February 3 but it rose back on February 10. ANZ cut its one year 'special' on February 11 to 4.39% and that moved back to 4.49% in mid-March.)

The lowest rate in the market for 18 months continues to be HSBC's 3.99% rate.

The lowest rate in the market for 2 years continues to be the 4.39% offer by HSBC.

Wholesale rates have stopped rising, especially for terms less than five years.

ASB last changed fixed rates on January 25, 2017 when they increased their 18 month 'special' by +10 bps to 4.75%.

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

A snapshot from the key retail banks is:

below 80% LVR 6 mths  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
  % % % % % % %
4.99 4.49 5.05 4.79 5.49 5.70 5.85
ASB 4.95 4.59 4.70 4.74 5.09 5.49 5.69
5.35 4.59 5.05 4.79 5.09 5.89 6.09
Kiwibank 4.99 4.69   4.79 5.25 5.75 5.99
Westpac 5.25 4.59 5.05 4.79 5.09 5.69 5.49
               
4.80 4.59 4.75 4.85 5.25 5.65 5.85
HSBC 4.85 4.19 3.99 4.39 4.89 5.29 5.59
HSBC 4.99 4.59 4.85 4.79 5.25 5.65 5.85
4.85 4.55 4.75 4.75 5.15 5.65 5.79

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

And TSB Bank has a ten year fixed rate of 5.99%.

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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35 Comments

FYI - ANZ's 1 year price should say 4.49% (not 4.39%) and Kiwi's should say 4.69% (not 4.59%)

Edit: I see this is now corrected :)

Yeehaa ! I jokingly commented 2 days ago that, since swap rates have fallen, the banks will now rush to cut rates but I didn't expect this at all.
Seriously, this is interesting because there has been no fundamental reason for the banks to raise their rates lately (I don't buy the core funding bs). The banks have raised their rates because they could and all other banks jumped on the bandwagon fattening up their profits. Now it seems ASB is breaking ranks and wants some more market share... no more cartel

This is good news to read this morning. I was a bit suspicious when the bank was urging me to fix for longer last month.

I think I remember a conversation I had with you early February when all news where about imminent surging interest rates and inflation and general consensus was to fix long term... I fixed for 1 year

I fixed for one year too.

I've gone contrary and fixed for 1, 2 and 3 years with an even split. It's more of an acknowledgement that I have no idea which direction the rates will go.

Splitting different is a good strategy to apply to essentially hedge against rate change exposure. I'd always be recommending that - whether deposits of lending.

It's a good strategy and at the rates I was offered I'd be foolish not to make effective use of them. The banks are being bloody difficult to deal with, I know because of two lots of financing I've seen this week. At the same time they really want to keep existing mortgages on their books so they're offering really good rates. Rates that investors aren't going to see from now on.

"This is good news to read this morning. I was a bit suspicious when the bank was urging me to fix for longer last month"

I cannot speak on behalf of the experience you had, but home lenders at any bank do not have knowledge of interest rate changes more than a day (if that) before they happen. The idea that a bank is urging you to fix for longer is not representative of the bank trying to trick you, but the individual lender you dealt with probably believing rates were likely to increase. Due to the uncertainty, most bank lending staff are advised to stay away from giving personalised financial advice

This is good news to read this morning. I was a bit suspicious when the bank was urging me to fix for longer last month

Given the fall in the 3 year swap rate I'm surprised there's no move on the 3 years. I guess it's not a big market in relative terms and best to keep the profit margin where possible.

The Fed is saying it will be reducing it's balance sheet. Now Germany wants to do the same thing but the ECB is currently saying no.

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

Its almost like banks think that housing lending is getting riskier, and thus they need a margin to cover this risk.

Although is that margin large enough?

The banks tried to con floaters into fixing (maybe it worked with some customers) and now realising that strategy didn't work as well as expected the banks have tempered their greed - would not be surprised to see negotiated rates available at 4.24% for two years. The way the world is heading could even see negotiated rates sub 4% again and negotiated floating rates at 1% below published rates are still available for good clients. Floating probably the way to go if you can get a negotiated rate around 4.65% to 4.75% then lock in for three years when rates drop back to to around 4%

Actually, NZ has pretty low floating percentage - only 21% per RBNZ
http://www.rbnz.govt.nz/statistics/s33-banks-assets-loans-fully-secured-...

Why would they want less on floating?

OK so perhaps there were a large proportion of fixed mortgages coming up for review in the first quarter and the greedy bankers ramped rates ahead of that, locked them back in and now drop the rates to attract fresh business. WIll trigger happy Trump's actions lead to lower interest rates and a GFC2?

I think you'll find that swap rates were really volatile in the December to March period - depending on how trump tweeted...

The ASB will have commercial reasons why it has lowered these terms - I have no idea why and I certain that none of you do - each person is playing to their own conspiracy myth.

Why do you seek such certainty BadRobot? It's really, really tedious. Of course people have ideas as to why!

And why are you so certain you have any idea. I have never said anything about certainty - I think it is you who want certainty and you create these elaborate myths to give you certainty. Creating a conspiracy by the banks is deranged.

I am certain I have an idea. Looks like we might be getting into semantics again! But anyway it's what we do here, bouncing ideas around and we thoroughly enjoy it.

lol

BadRobot, let me quote you twice,
"I certain that none of you do" & "I have never said anything about certainty"...

I am certain none of you have any idea WHY the ASB has dropped it's rates - it is a commercial decision. The "certainty" refers to absolute proof that Dr Smith refers to. Contextually different. It's understanding the fine distinctions of English language.

I don't care why they dropped the interest rates and I think it is pointless discussing it really. You can't do anything about it - move on and focus on what YOU can control.

Wait until you see the upcoming rate increases. The next couple of weeks will be exciting.

It's not paranoia if they are really after you.

But how do you know.

Daily Swap rates have taken a dive! The 5 year down from 3.1 to 2.8 - there is no excuse for banks now - they can definitely cut interest rates - negotiate hard if you are looking to fix a mortgage - they should now be able to offer 5 years fixed at 5%.

No one wants long terms, per RBNZ stats
http://www.rbnz.govt.nz/statistics/s33-banks-assets-loans-fully-secured-...

only ~2.5% of all loans with maturity date > 3 years from now.

Scoop up the cheap rates. You should be able to get a lot of the fixed terms under 5% now. If not negotiate harder. If the Fed starts unloading it's balance sheet there'll be chaos in the bond market.

Totally confused!
Most people on here are saying that interest rates are going up and going to stuff investors and current home owners!
Now some are saying that the rates shouldn't have gone up?
The Man and a couple of others have been saying that they won't be going up and I said that rates won't hit 6 per cent again fixed!
Maybe I was right?
Gordon, have you got a reply, as you are normally right!
Maybe a relation or someone you know can give us why they aren't going up?

You seem focused on a short term shift in swap rates. As I've said above scoop up these rates while you can. Fed policy on buying bonds is ending. Then combine that with the volatility that the potential war escalation and the long term upward pressure goes on.

If you believe the rates will go down then fix for 1 year the same as the others who have. A simple decision to make.

Just think of it like apples at the supermarket. One week they are 99 c per kg, then they are $ 4 per kg for the rest of the month.

But seriously , probably not a bad strategy for the banks. Offer a low 1 yr rate, hike the rates when the years up , most would renew at the newer higher rate. Some would go to floating to wait for another special. A small number might switch banks.