State-owned bank raises floating rates out-of-cycle, upping them to match its main rivals. Also raises overdraft base rate to 9.90%

Kiwibank's has today (Monday) updated its website to increase its floating interest rates.

It's floating mortgage rate is up +10 bps to 5.80%.

Its revolving credit rate is also up +10 bps to 5.85%.

And its overdraft base rate is also up +10 bps to 9.90%. (Margins apply above that.)

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

Kiwibank last raised its floating rate in mid-May 2017. It has raised its floating rate by +55 bps in 2017, as follows:

 change history Change Floating
  % %
Start of 2016   5.65
March 10, 2016 (the -25 bps OCR reduction) 0.00 5.65
March 11, 2016 -0.20 5.45
August 12, 2016 -0.20 5.25
August 16, 2016 (the -25 bps OCR reduction) 0.00 5.25
November 22, 2016 (the -25 bps OCR reduction) 0.00 5.25
January 10, 2017 +0.15 5.40
February 9, 2017 (the no-change OCR decision) 0.00 5.40
March 10, 2017 +0.15 5.55
March 23, 2017 (the no-change OCR decision) 0.00 5.55
May 11, 2017  (the no-change OCR decision) +0.15 5.70
June 22, 2017  (the no-change OCR decision) 0.00 5.70
July 31, 2017 +0.10 5.80

The last bank to raise their floating rate was Westpac, which hiked it +11 bps on June 15, 2017.

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

below 80% LVR as at
Dec 31, 16
as at
Jan 31, 17
as at
Mar 31, 17
as at
Jun 30, 17
as at
Jul 31, 17
      %    
5.59 5.69 5.79 5.79 5.79
ASB 5.65 5.80 5.80 5.80 5.80
5.64 5.79 5.90 5.90 5.90
Kiwibank 5.25 5.40 5.55 5.70 5.80
Westpac 5.65 5.65 5.75 5.84 5.95
           
5.55 5.55 5.65 5.75 5.75
HSBC 5.59 5.59 5.59 5.79 5.79
HSBC 5.59 5.54 5.79 5.79 5.89
5.54 5.54 5.65 5.80 5.80

We are not aware of any compensating term deposit rate changes from Kiwibank.

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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12 Comments

How long until stressed borrowers start blaming their banks for 'unreasonable terms' by hiking their mortgage rates? "You lent me the money, so give me a break. It's not my fault YOU raised interest rates, it's yours" is likely to start doing the rounds in the not to distant future. Banks are going to be easy targets given their recent 'predatory' performances.....
http://www.afr.com/business/media-and-marketing/tv/commbank-not-to-blame...

Oh my... where is mr. Key, who claimed that interest rates will stay low for the foreseeable future

Margin Squeeze ?

This occurs where Banks come under pressure and find room to lower rates paid on retail deposits has run out.

GOOGLE :- Margin squeeze in Dutch Banks for more info

KB floating rate is still lower than Westpac and BNZ.

As per mine above. It's likely that all local banks are headed back to the historical 'norm' of 7.5%, floating, to give themselves some 'headroom'. Most people will and can pay it. Those that can't ( the Squeaky Wheels!) will be given 'grace' to have lower rates applied. It keeps the banks balance sheets clean , and once again, will be paid for by the 'good people'.

7.5% floating? That would be difficult for many Aucklanders who have borrowed for an inflated house price over the last 5 years.

Yes it is but the point is that I suspect the Banks are looking down the barrel of Margin Squeeze in the not too distant future as their ability to pay less for deposits is eroded .

Given that floating rates were around 5,25% not that long ago, an increase to 7,5% is a BIG jump in installments for many indebted households , and businesses where the family home has been hocked to fund a business

People knew the risks when they went in. Considering that interest rates dropped a few percentage points pretty quickly after the GFC, people should have known that the record low rates were not sustainable very long term. All they have really done is push house prices up due to people being able to afford to service a larger mortgage. But the music does eventually stop.

If the current slide in loan demand continues rates will go in reverse before long.

Why?

Why? House prices aren't part of CPI? They didn't put rates up to restrict prices, they won't drop them to support prices. The OCR will only drop if there is a material deterioration in wider economic conditions or to keep inflation in the band. House prices could tank, that in itself is of no concern to the RB. Anyway, 60% of bank funding is from offshore and is not at OCR, so we will pay whatever the going internationsl rate is.