ASB positions its fixed mortgage rates below almost everyone else for terms of 12, 18 and 24 months after second cut in April

ASB has cut its key one year mortgage rate.

It's new 'special' is now 4.45%, a reduction of -14 bps.

A similar reduction applies to its standard rate and that is now down to 4.85% for a fixed one year term.

The changes are effective today Friday).

Identical changes have been made at both Sovereign and BankDirect.

This now positions ASB with the lowest rate for terms on one year, eighteen months, two years and four years compared with its all main big-bank rivals.

However the lowest rate in the overall bank market for one year is still the HSBC Premier 4.19% offer. ASB is the next best.

The lowest rate in the market for 18 months continues to be HSBC's 3.99% rate, also followed by ASB.

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

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

ASB last changed rates on April 7 when it cut its 18 month and two year rates. Prior to that it changed 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 4.45 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?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

73 Comments

Overseas income has once again been recognised. Banks have to be loose a bit on loans otherwise profit will be impacted. Aussie shareholders are the masters not NZ public.

"Overseas income has once again been recognized." - Is that a fact?

Yeah well look at the competition 3.99% fixed rate from HSBC. Of course the rates will drop, how else are Kiwi's supposed to afford a home if they can't borrow more? And we're pretty much the only ones buying now.

Interesting that it's the 1 year term. Looks like the competition for new mortgages is back on.

Always was going to happen - global inflation is just not happening, and negative rates are still about overseas - The recent media/bank hype was just throwing the dummy to get people to lock in higher longer term rates before all the banks start cutting shorter ones again.

The EU and Japan are still pumping huge amounts of new money in via bond purchases. The Fed is still doing the same but have signaled that they are going to ramp this down. It's an indication and no change has occurred. So good rates are still out there, get them while you can and use them to pay down debts at speed (if you have the spare money).

I thought fed stopped bond buying before they started raising interest rates and is now actively planning to unwind their bond portfolio? What I wonder is the fiscal impact of selling those bonds and where the money goes. Since they own like 3 trillion or something in largely treasury debt it subsidises the federal government since they pay themselves. If they sell those bonds and remove the money they created from the money supply won't the federal governments interest costs go up substantially? Apologies if I have facts wring, feel free to correct.

I thought I had been reading all the time that interest rates were meant to be going up or hiked as they call it.
There is no reason at all for the economists to be tipping them to,rise, and as I have said previously do the opposite to,what they say and you will normally be better off financially!

Look at where the messages come from. The Fed has been signalling changes and that's a part of the process of making sure the market is aware of upcoming changes.

One thing that did come back in NZ was inflation. The change was visibly happening and we have inflation again.

no good having inflation if you dont have wage inflation...

Bill English said that's a sign of success. David did actually pull up some figures in an article to examine pay increases. Pay has been going up even though inflation was low. Now people can say inflation is hurting them when they ask for a pay increase.

You don't generally get sustained inflation without wage inflation since it's the wage but that makes it self sustaining. High goods prices -> higher wages -> higher costs of production -> higher goods prices. If it's just higher goods prices then it's probably just a one off like an adjustment in oil prices or something.

Stagflation and financial repression are the name of the game. Those who borrow the most win the most, until if ever the music stops. It looks like Trump just called the Fed’s bluff, by committing to borrow a few more trill. That should be the Feds last chance, confidence will be lost if they don't do what they say.

exactly - rates cant rise without blowing the place apart

banks just took advantage to increase their margins - firstly by not passing on the base rate cuts and then pushing rates up with no local justification - now with Auckland property stalling - the banks are reluctant to lend without much higher levels of equity, especially in the vulnerable outer suburbs they are left with competing hard for existing business and so rates dropping to try and grab market share from the 40%+ equity holders

there are no signs of a sustained global recovery - even where people think its happening, USA and EU - they are still running the printing presses flat out

I would be far more worried by the recent pay equity deal - as although its for 55,000 workers - there are another 250,000+ in similar professions who are all going to push for similar 25% rises - and as we all know those on the low wages will spend every cent of their increase on normal daily living - and fuel localised inflation -

That potentially could led to interest rate rises as the banks will suddenly stop screaming that they borrow all their money offshore - and of course 2% would cripple those who sit with 600-800 K mortgages in Ranui, Massey and most of South Auckland -

So is this ruling effectively a currency debasing hidden in a court ruling ?
And are houses therefore 25% cheaper (until inflation catches up)?

knpnuts - try to understand the basics - there was no "base rate cut". The RBNZ signalling a lower OCR changes absolutely nothing in the banks funding costs as they don't fund off the OCR. Unless they take that announcement as an opportunity to cut deposit rates, and then lending rates accordingly, funding costs DO NOT CHANGE. The question is why didn't they drop deposit rates ? - in fact they increased them because they have a funding problem which has already started to limit lending into the likes of the commercial property market, Facts are that depositors such as me have moved our cash reluctantly out of banks and up the risk spectrum into the likes of equities and property.

That action may make your property more expensive to purchase as asset prices go up on our desperate search for yield, but it sure doesn't signal lower rates. In fact the exact opposite until the depositors are attracted back to banks, and for me that's at least another 100-150 basis points away in term deposit rates..

than help me out with the basics - whilst I understand that the banks borrow much of their money offshore - I was under the impression they still borrow a reasonable % onshore in NZ from the central bank and the OCR was the rate that this borrowing occurs ?

Also I understood that the issue was with property no longer rising they are reluctant to fund into asset classes where there are negative returns, both commercial and private property, where the buffer of rising prices and capital gains has disappeared.

as for depositors coming back to banks - if you do get 150 basis points, pretty sure that will mean a whole load of other equally more attractive options - ultimately term deposits are so incredibly low as they are virtually risk free and are more about a balanced portfolio than a serious attempt to generate income.

Basic investment 101 - term deposits = shit returns but sleep safely

1. Banks borrow a minority of their funding requirements offshore. Most is sourced locally.

2. Banks do not borrow from the RBNZ. That ended a long time ago.

3. Returns for term deposit customers still give real returns, ie returns above the inflation rate. Except for very short terms. This is unusual to New Zealand. In most other developed countries the return is less than the inflation rate.

4. If banks make loans into sectors that are likely to lose them money, depositers are less likely to place their money on deposit at them.

5. Generally depositors/investors are lazy. They don't shop around. They don't research the institutions. Banks take advantage of this lazy 'replicating portfolio'. There is danger wanting high returns for no risk and doing no work. Remember the finance company chaos in the GFC?

6. Every investment involves some level of risk. There is no such thing as 'risk-free'. That requires active management/investogation on the part of investors.

thanks david for the information which was informative

I would question the real returns- as once tax is thrown in I am not sure the return will be above 1% which technically is real but not sure I would consider it a valuable use/return on capital. Also I seriously doubt that many investors check the nature of a banks loan book before depositing their money.

cheers

Basic investment 101 - term deposits = shit returns but sleep safely

just how shit are those returns..?
If inflation is 2% and term deposit is 3% ... then real return is 1%

BUT... you are taxed on the nominal return ... so the actual real return is almost 0%

eg $100, 000 at 3% = $3000 taxed at say 30% = net return of $2100 less 2% depreciation of $2000 = net return of $100.
In my view the loss of purchasing power of money is more than the CPI rate...so if u use 3,4 or 5% as a deflator ... the real , after tax returns are very -ve.

Is it any wonder real estate is a preferred way to preserve ones wealth..??

That is why interest rates need to rise. All this cheap credit hasn't done NZ much good, especially as it helped fuel the housing crisis with sky rocketing house prices. After every boom there always seems to be a bust. eg Look at Australia and it's mining boom. In 2008 NZ envied Australia due to its natural resources and the money it was making from them. Now, not so much.

Real estate today is extremely high risk, there you will need to generate high returns. It is also becoming less liquid as the length of time to sell stretches.

Shares remain the best balance of risk and return in NZ, also long as you have a balanced portfolio.

i would also recommend some term deposit to full balance your risk

The longer interest rates take to normalise the more pain there is going to be in the future.

Banks will take care of their own profits and even in a downturn are insured for defaults, it's normal for them to compete for business and put rates up and down. However central banks worldwide are kicking problems into the long grass, where they are growing uglier and uglier. QE and low interest rates have gone on way longer that they should have.

Savings won't happen, pensions won't grow at the rate needed and cheap debt will keep inflating asset prices to the long term detriment of all.

the die is set - rates cant normalise ... asset prices will keep inflating until they cant ... if you can youre best to spend your savings / pension funds now as they are set to lose all value as money/debt loses any value

Nil or Low rates is the new normal, and we have to think outside the box to understand that this is going to be the way for the next 2/3 decades as governments are scared of the recession if interest rates are raised and no politician wants to lose his position on a/c of this and Central Banks pretty much have no control of what has been let loose after the GFC. The choice few who have the resources and the guts to make money, will keep doing so, but the pyramid is going to get broader and broader at the base and narrower and narrower at the top.

At this stage of the game if mortgage rates rise, house prices will fall.

Agreed Smokey,
i'm not saying it's right but I think it's true

ham n eggs - do some research, just about every recession is at least in part the consequence of higher interest rates. Everyone knows that, including central banks, but it doesn't stop them from taking them as high as they think they need to, or from making a mistake that's unintended. I'm sure its no real consolation to a bankrupt in that environment in being able to claim "rates should never have normalised as its hurt me and others". That's exactly what the smart money awaits as it knows itsgoing to get your assets a hell of alot cheaper. The "Its different this time" theory has created many bankrupts throughout history.

0.25 to 0.50% is not going to make much difference, aye. It is all psychological.
The loans keep shifting from bank to bank on these small differences.

Lol 0.5 is twice 0.25 so it should be the biggest difference. If I buy an an asset based on 0.25 and rates go to 0.5 then surely that asset is worth a lot less than it was.

It is not the asset value, but the ability to bear the additional cost of that increase that is relevant. On a loan of 600k, an increase of 0.25% pa would translate to just $4 or so daily additional cost, less than a cup of flat white. Why is that not affordable ?

lol - I like how you split it daily, most things sound small when you do it that way. It's the better part of $1500 per year... most would squawk if something like insurance or rates etc went up by that quantum and did so with increasing frequency (e.g. more than once per year).

$1500 would be equivalent to about 2.5% the median take-home pay for a household.

Yes, but to a person who took a loan of 600k that is quite affordable and that was the point. Agree that regular increases of that kind (2/3 times a year) would be annoying to even that person who could afford a 600k loan.

Banks are lending money on sky-high sale prices using affordability and not valuations when approving loans, and its contributing to the bubble .

Here's a case in point of a current Mortgagee sale at 21 Chester Ave Greenhithe ( see Barfoots website ) .

Its a noisy piece vacant land abutting the motorway, allows a single dwelling , with a rateable value of just $285,000 and which was sold for over $1,0 million to an Asian speculator who was hoping to either build or flip it

And its gone to custard

I hope the Bank concerned gets burnt , because there is no way in hell that section is worth more than around $500,000 tops , and if they lent more than 80% of that , then its reckless lending .

Banks should be restricted from lending more than 80% of 120% of the GV .

Anything over that should be made up by the buyer .

What do you mean by 'not using valuations'? Given LVR restrictions, valuations would be used. The voracity of those valuations may be worth questioning, but that's the whole point of the speed limits.

Banks don't tend to lend 80% on vacant land mate. If they did, they deserve to get burnt ;)

Right. Last I heard banks will only lend up to 50% maximum on bare land - so someone is going to take a serious haircut - could also be one of those situations where the buyer was depending on foreign income to service the mortgage and their ability to transfer those funds in has dried up since China cracked down on money transfers for property

Boatman, I understand your frustration when, on Monday, you posted, "interest rates are going to rise" but you shouldn't just make things up. Banks lend against the lower of purchase price or valuation.

It might have had a private valuation that justified a higher price.

I love the idea of international speculators losing money. Wouldn't it be great if prices dropped 40%, they took a bath and we could all buy our houses back at decent prices.

Hardly, have you considered that NZers would take the sane bath as foreigners ?

Yes, I worry about it a lot, especially the FHBs. It's why I get so angry about the articles in the herald and stuff furthering the myth and quoting terrible property advice. I tell everyone I know to be careful, that property prices can fall, that "this time it's different" is a fallacy. Chicken Little doesn't want to be right but come on we all know what is going to happen. It might not be this year but one day the music will stop.

The only consolation is that if a bunch of foreigners bought at x and sell at x-30% then we get our houses back and their 30%. It's a small silver lining but it's better than the deal we are getting on these knock of courses to international students.

The reality is that people that are buying at anytime should always buy what they like and only if they see true value.
You make money when you buy a property and not have to worry about inflation or capital gain as it will take care of itself!
We do get sick of reading and hearing things about the so-called NZ housing market when they are only talking about the Auckland market, and they obviously aren't aware that NZ does not just comprise the overhyped Auckland market.

Sure, when finance is not a barrier, there's no reason why the punters cannot practice their own alchemy (at least in Auckland anyway).

It is a good point - saw a Mike Pero ad on TV that showed a pretty smart Hoon Hay house for sub 500.

Still, on the other hand, Auckland housings stock makes up ~50%+ of entire country stock and it's fair to say that it's the economic engine room and if it get super sick.... well....

Last Monday 24th Roger Kerr's stated in his article of the 3C's:
"Nobody believes interest rates are going to stay low"
I commented:
"I still do"

I am guessing in order to get new business banks have to undercut one another. But hardly anyone borrows at a headline rate anyway, as you can usually get a good amount off that. But we really need loan to income ration lending in NZ to make sure banks aren't overlending. Look what is happening in Western Australia at the moment with property prices tanking after a boom, which should be a worry to everyone

Rob, can you please post a link to any article about "tanking property prices" in Western Australia, I'm very interested.
Thanks

Property prices drop 40pc in Australian city

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1184...

It is interesting how things can turn around like this. It wasn't that long ago when it seemed everyone was leaving NZ to live in Oz., and we didn't have a housing shortage in NZ.

The headline for that article is very misleading. Property prices in Perth haven't dropped 40%. Perhaps the odd property has dropped by that much over a ten year period in Mandurah which is like the Warkworth of Perth over an hours drive from the city, probably more in rush hour.

According to CoreLogic Perth values increased by 199.4% from 2000-2010 compared with Sydney's increase of 61% over the same period. Since 2010 Perth values have declined by 3.3%. So Perth had a rather unnaturally high growth period during the first decade of this century.

Perth currently has an over supply of houses although prices actually went up in March. It would be more accurate to say that Perth prices have declined by about ten percent over the last two years.

https://www.corelogic.com.au/news/boom-what-boom

You seem to be quite willing to find evidence to counter anyone else's comment but unwilling to find evidence to support your own comments.

BadRobot, most of the figures and information were in Rob's linked article and the CoreLogic link I gave. People can freely Google it too. I thought I did a fairly good job of analyzing things and providing a reference. Are you claiming I am wrong about Perth?
Another link:
http://www.watoday.com.au/wa-news/perth-home-prices-rise-after-threeyear...

Also:
https://www.domain.com.au/news/perth-median-house-price-drops-but-rate-o...

In December 2016, the Perth median house price was $571,303 and in March 2016, it was $578,426.

That certainly is not looking like a 40% decline. I call Rob's link Fake News!

I'm not referring to this specific comment. I'm referring to your overall comments - your "fake news".

The thing is that any figures can usually be spun either way, depending on what view someone supports.

eg. NZ doesn't have a housing crisis, we just have a very strong demand of houses, which shows our economy is strong?

Thanks Rob. Would it be correct to say Perth had massive growth because of the mining industry and since iron ore tanked, so did Perth ?

I would think that could be a reason. That is why these sorts of things go in cycles. The problem is that NZs property boom cycle has been going on a very long time, and only stalled with the GFC in 2007-08. IMO it appears we need a good constant influx of people into NZ to keep the housing market strong.

I believe mortgage rates are likely to drop below the lowest point reached in the last eighteen months. Banks are back offering discounted rate deals and cash incentives to attract business. They recently conned thousands of Kiwis into re fixing at rates that are now looking far too high. Could be able to negotiate 4% for 12 months fixed with any of the big Aussie banks soon, especially in the run up to the election when house sales drop and the banks have to compete hard for the lower volume of business.

Hard to see without some large drop in funding costs ... still with the volatility of markets in the Trump era, you never know. Rates are still on an increasing bias though. Compare Year on Year.

I don't know why people are putting up with these high interest rates. I've just renewed mine at sub 4%, it's been below 4 for quite some time now.

I imagine it's for 1 year, what lending institution, please ?

Anz. And it's reviewed monthly.

Reviewable monthly? that doesnt sound like a normal lending product. Is it rural farmer mike? There must be a margin on it, otherwise that's pretty "interesting" lending policy from the bank.

Yes it's a rural facility, calculated off the 90 day bank bill rate plus a margin That is negotiable with the bank based on how sound your business is.

ANZs rural base rate is 3.65% (https://www.anz.co.nz/auxiliary/rates-fees-agreements/rural/)

So you're saying your margin is < 0.34%, for an all in variable rate under 4%? I find that difficult to believe. And if true, wouldnt want to be a ANZ depositor, b/c that's not pricing for the the risk of rural (which, it must be said is not small)

Thanks FM, can you please explain the "renewed monthly" part, what kind of loan is that ? I've never come across anything like it. Thanks

yes - 30 day bank bills - just keep rolling it over - at the rate on the day

Has the Bank in this case got the right to recall the loan after 90 days ?

This might be surprising but if you read your mortgage contract your bank can call the loan due for full repayment at any time. They normally wouldn't (marginal business, they want to keep an affordable line of credit open) but in the case of an equity issue or the loan may/has fallen into arreas/default they can. The other thing is in the event of a sudden squeeze (i.e. they can no longer meet RBNZ requirements) and they can't resell their book they might call for full repayment of loans (probably starting with their best client) to take pressure off.

Rates have been competitive for months. Been seeing a significant disparity in terms of competitiveness between different lenders.

BNZ: Most competitive for owner occupiers/mixed security. Seeing rates as low as 4.09% 1 YR, 4.25% 2 YR, 4.45% 3 YR for the ideal client.
ANZ: Reasonable, pretty good on 1 YR (4.25% and 2 YR's 4.45%, no/little discrimination between primary residence/investment & LVR.
Westpac: only slightly more competitive than ASB.
ASB: Final offer clients get from ASB isn't much more different than the advertised rates. 5 - 10 bps best case scenario. Strong discrimination against sole investors.

Banks aren't fighting against each other at the moment but instead protecting their books. They amended their margins with the rate changes from October - Feb, however, competition has crept back in at an easy pace. Nobody is even bothering to compete with HSBC or BNZ's low rates.

It's not just media and economist's inside NZ that are predicting lending to become more expensive in NZ.
Hans Redeker, global head of FX strategy at Morgan Stanley said yesterday on the sudden weakness of NZD in global currency trading;
"Domestic Concerns Key.
These are not the main driver for Kiwi weakness, however, stresses Redeker.
“It is about leverage, asset valuation and wage growth in the economies turning lower,” says Redeker.
There is little chance of substantial wage growth now, for example, given the New Zealand economy’s own transition to a more service-based model.
Subdues consumer confidence is also a problem and suggests lower retail sales and spending, which will weigh on GDP.
Another issue is NZ’s foreign liabilities, which are higher than most countries and account for 60% of GDP.
These are essentially foreign loans which are becoming more expensive to service as global interest rates start to rise.
“Foreign balance sheets offer new vulnerabilities as soon as global funding costs increase. Both economies have about 60% of GDP net foreign liability positions, and funding these liabilities at current yield differentials seems difficult, suggesting their currencies will decline,” says Redeker.
NZ’s domestic banking sectors are, “wholesale dependent,” says Redeker, suggesting the rising cost of international capital could impact on them more than other more ‘capital self-sufficient’ countries.
International funding costs are likely to rise steeply if the Federal Reserve were to increase interest rates by as much as many analysts are suggesting.
“Should our view of the Fed hiking another six times prove correct, local cost of funding in Australia and New Zealand will rise even if the RBA and the RBNZ keep their rates unchanged,” says Redeker".

which one do you get the most commission from? ;)

We are in a debt cycle. At the end of a debt cycle there is deleveraging. Why do so many commentators on interest.co.nz ignore the well documented previous cycles as if something new is happening here? Do people honestly believe that suddenly there is no debt cycle and we are in some new debt plateau that will go on in perpetuity? Infinite debt?

Look at this hilarious (or tragic) article from the US in 2005. 2005 they were in full bubble mode, swelling up towards the top of the debt cycle. Certain commentators were concerned and believed there was a bubble and others (like this article) were shouting "fake news" and "bubble myth exposed". The rationalisations in this article sound so similar to the ones being made by several commentators on this site. Just because something has been happening for a long time and your brain has tricked you into normalising it (because that is what the human brain has a habit of doing) does not mean that suddenly this is no longer a cycle, with a high point and a low point to come.

http://www.newsbusters.org/blogs/nb/noel-sheppard/2005/11/30/media-myths...

They think they're smarter than everyone else including the market. Some aren't worried because they aren't carrying debt, whereas others are and have interest only mortgages. We're already in dangerous territory but some don't seem to see having 168% debt to household income as being a problem. We've never had debt levels that high and if that credit expansion stops then shrinks we're going to fall harder than in 1987.

Consider that 2/3 of people are carrying a balance on their credit card and then look at how many people are living from pay to pay in this article.
http://www.stuff.co.nz/business/money/91940085/high-incomes-awful-financ...

To fit with "helping you make financial decisions" I'm saying that low interest rates are a great time to pay down debt. At this point I'll say be frugal to do it as house prices can fluctuate with the market but debt maintains the same dollar value. Even taking your savings and diversifying with cash, equities and mortgage payments will leave households in a better position.

However don't envision many managing their finances or investments like that despite the GFC being such a recent event. Perhaps people don't reaslise we aren't in the same position to spring back from an economic event.

Bang on. Those with debt should assume rates say 2% higher and set repayments at that level... quicker the principle pays down, lower the risk. And don't clamber to get on the wagon come what may...