A new sub-4% mortgage rate is launched to fire up a flagging Spring selling season. This hot new rate comes just as wholesale rates start to move up again

HSBC has launched a new 18 month 'special' fixed mortgage rate of 3.87%.

This is a -22 bps reduction from its previous rate for this term.

To qualify, you must be a HSBC Premier customer, and must provide an owner occupied property as part of the security.

It is available to both new and existing HSBC Premier customers who borrow at least an additional $100,000. Minimum equity and deposit criteria apply. HSBC’s normal lending criteria applies. It is being promoted as "for a limited time".

This is the only home loan currently being offered in the New Zealand market for under 4% pa and is even lower than the 3.95% rate for the same tenor that the Bank launched in February 2016, which at the time was the lowest residential mortgage rate in the New Zealand market for over 50 years.

To be a HSBC Premier customer you must have combined lending of $500,000 or more, or $100,000 of savings and investments with HSBC. (Early repayment fees may apply to fixed rate loans.)

At the same time, it has raised its one year fixed rate by +10 bps to a still market-leading 4.19%.

Over the weekend, SBS Bank also made a small change to their three year rate, reducing it -16 bps to 5.09%. That new rate matches some of the main banks for that term.

Update: BNZ has also now changed a rate. Its 2 year carded fixed offer is now 4.69%, a -6 bps reduction to match its main rivals.

These changes come as wholesale swap rates start to rise again. More rises in these base rates are expected today following Wall Street's moves at the end of last week.

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

Here is the full snapshot of the fixed-term rates on offer from the key retail banks.

below 80% LVR 6 mths  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at October 1, 2017 % % % % % % %
               
4.99 4.55 5.15 4.69 4.99 5.89 6.09
ASB 4.95 4.45 4.60 4.69 4.99 5.49 5.69
5.35 4.59 5.05 4.69 5.09 5.89 6.09
Kiwibank 4.99 4.55   4.65 5.09 5.75 5.99
Westpac 5.25 4.59 5.15 4.69 5.09 5.89 5.59
               
4.80 4.55 4.69 4.69 4.99 5.55 5.75
HSBC 4.85 4.19 3.87 4.29 4.89 5.29 5.59
HSBC 4.99 4.59 4.85 4.69 5.09 5.49 5.85
4.85 4.55 4.65 4.69 4.99 5.55 5.69

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

And TSB Bank still has a ten year fixed rate of 6.20%.

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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48 Comments

It shows just how awash the world is with QE money .

The tragedy is that all the easing of monetary policy by the US , Japan the EU and China has neither stimulated the economies in trouble , or sorted their debt overhang .

"The tragedy is that all the easing of monetary policy by the US , Japan the EU and China has neither stimulated the economies in trouble , or sorted their debt overhang ."

But it did spread it more widely around the world. All for one and one for all!

Boatman, you cannot say economies have not been stimulated by QE. We may be mired in a depression without QE. QE may have moved the world economy from a depression to tepid growth. What we do know is that we had a similar set up to 1929 in 2008, and rather than a 30% contraction in GDP, we have world wide low growth post a 12 month deep recession. I can remember flying up the East Coast of Australia from Sydney over Newcastle multiple times (for work) early 2009 and their was no shipping visible, now you have the usual 50-100 visible ships. Things were incredibly dire at the time, and QE may very well have prevented a depression. A depression would have destroyed families, suicides would have risen and child poverty would have soared, tax revenue would have fallen off a cliff and we would have had austerity in NZ, with slashed public services. Better to have the first world problem of FHBs being unable to afford their own home, than the social impact of a depression on a nation/ world economy. Tepid growth in the US and we get Trump and BREXIT, who knows what we would have got in a worldwide depression, think Hitler, Mussolini, Stalin in the 1930s.

Tepid growth in the US and we get Trump and BREXIT, who knows what we would have got in a worldwide depression, think Hitler, Mussolini, Stalin in the 1930s.

So you're effectively saying that the global economy needs greater amounts of debt (an extension of the status quo) or else we run the risk of the world living under dictatorships. To some extent, that is the case now.

Just saying from a logical basis cannot say a non-binary event has not worked, unless conduct an experiment in which the intervention is applied to one group and not the other. QE was initiated as the concern at the time in 2008, was we were entering a worldwide depression. We did not enter a worldwide depression, we may not have entered one without QE, but we cannot say QE did not work. The world may or may not need more debt, we will have to see how quantitative tightening and rate rises pan out.

So you're effectively saying that we cannot evaluate the effectiveness of QE, but we have more debt, which was primarily one of the drivers for needing QE in the first place.

That's a little bit circular if you ask me.

QE was required as the US banking system was on the brink of collapse, principally due to the use of financial derivatives including mortgage backed securities, derivatives of derivatives, and derivatives of derivatives of derivatives. Key with US was fact that those who wrote the loans, would on sell the loans and so were not on the hook in the advent of mortgage default. Debt can be good and bad. Just because the US had NINJA loans, non-recourse mortgages in many states, and financial institutions betting on derivatives, does not mean debt is bad. Normally institutions are pretty good at evaluating risk if their funds are at risk in the event of default. The more I read these threads the more I see most people are dogma driven and quite financially naive. The thinking is very black and white, whereas the world is very nuanced. It is like having a debate with a teenager. Some people get it, some don't. The world has changed, adapt or get left behind.

So you'd be at odds with the ex-BoE governor Mervyn King then. Is Mervyn King "dogma driven" and "financially naive"? What do keyboard warriors understand more than the architects of monetary policy?

Excessive leverage is the common theme of many financial crises of the past. Are we really so much cleverer than the financiers of the past?”

Well, we weren’t. Excessive leverage once again proved to be the weak point of our financial system. And wisdom does not seem to be on an upward trend.

A decade on, one might expect that leverage would have been significantly reduced. And in the majority of large banks, that is indeed true.

But the opposite is the case for much of the rest of our economy. Indeed, total debt relative to gross domestic product is higher now than it was immediately before the crisis.

https://www.wsj.com/articles/in-echoes-of-financial-crisis-warning-signs...

I'm not impressed with Mervyn King's track record. You need to call things in advance, not be a hindsight warrior. I saw the GFC was coming liquidated all property except the family home, liquidated our ASX share portfolio, bought some more gold (I bought initially in 2002, watching the break of $350 that was referred to as the Marginot line, bought physical gold via Australian koala coins at the time legal tender for $200 and contaning $210-$230 of gold in Aus dollars from 2002-2005, unlimited upside capped downside) and put funds into kiwibonds (I worked on the policy I would only lend to those who could print money to pay me back. Though given the finance company bail outs I was worse off for this foresight). Then from 2011 I bought property as I could see the world was not going to come to an end, but we would have suppressed interest rates for at least a decade. I may not have letters after my name but I have called things previously, and have retired in my early 40s.
My calls at present are Auckland/ Hamilton/ Tauranga property down 10-30% from top, rest of the country static to 10-15% fall due to low interest rates. NZ will be in recession within 12-18mths. US quantitative tightening will fail, the US will be in recession within 18mths and the printing presses will open up. After the initial downdraft you will want to open gold and property. I have liquidated most property I own, at present I own our own home, 2x houses central Wellington (one for each of my sons, though I would not tell them this) and have a residual rental property as I only sell when tenants move out. I have never raised rent on a sitting tenant and leave them to it. I have cash and a share portfolio that trades with maximum hold 15 days, and I will sit back and wait for the next crash. And when everyone thinks the world will end I will wait 6-12mths then buy with both hands.

The reason I'm up at this odd hour is because since retiring I keep teenage hours (though the wife doesn't like it), up to 0400hrs (as like to see what happening with US markets and they now open at 0230hrs, and good to read while everyone else sleeps).

I see. A troll playing comedian.

No not a troll, not a comedian. Everything I have stated is factual. Just have a knack of calling markets, in reality it is not that hard. Buy property when you can purchase a less than 10 year old modern home for around the cost of constructing a new dwelling, where I live 2009-2013 (essentially get the land for free). Be patient, do not go for fads, and don't waste money trying to impress neighbours. I drive a 2006 car, neighbour drives a 2016 Audi, his wife a 2017 BMW and stated I was "lucky" I was in a position to retire. My wife and I both found this assuming.

I Agree

"a depression would have destroyed families, suicides would have risen and child poverty would have soared," How ironic that cheap money, and a neoliberal government have accomplished the same result.

Start of the month, as per usual release real estate numbers.They will be historically weak. Bottom line, mortgage debt growth has stalled,house price growth has stalled. At some point soon one of the big 4 will look to entice borrowers to push for increased market share, with discounted rates and food vouchers. Who knows could see a little competition.

I think more likely, default risk will increase with the capital gains dried up, falling prices etc. Which means banks will be forced to push up interest rates to account for the increased risk in the market.

And the outcome of the banks increasing rates , out of sync with the RBNZ will do what ?

The RBNZ doesn't get to decide what the banks lend at. They cannot control the risk profile of mortgage lending in NZ. They have some influence, but they don't get to decide the margins that the banks need to cover losses.

Ocelot, your thinking is just plain wrong

Thank you for that informative educational response.

Yvill - can you better explain your one liner about Ocelot’s statement - he is dead right, not even a point of debate, yet you dismiss it with one uniformed and unexplained statement - there is a duty to explain such sharp dismissals of someone’s opinion to retain your own creditablity.

Ocelot, Grant A:
If there is increasing mortgage default the banks WILL NOT increase interest rates because it will exacerbate the defaults and that's the last thing the banks want

" with discounted rates and food vouchers" - Many a truth is spoken in jest........

Kiwibank TV ad last night offers a free holiday in Samoa with new mortgages. New mortgage war unfolding?

What is the cheapest rate ever in NZ? This must be close?

I heard that the Government offered something like 3% rates to veterans for a while after the Second World War.

The low rate is indicative of the slumping residential property market.
A slow down in that market is a disaster for banks because if they don't lend they go broke.
Watch out for more bank sweet heart deals as the market tanks even further.
The residential market is entering its early death throes, so it will be a race to the bottom for lenders.
Watch this space.

Can't disagree with any of that.....

What's your opinion on the Aussie property market?

"Sydney house prices fall in September, for the first time since 2015"

http://www.afr.com/real-estate/sydney-house-prices-fall-in-september-for...

Big Daddy's comments above equally apply to Australia. It's 'their' banks after all!

Agree that Bankd need to lend, however the Banks inNZ are in a very sound financial position.You are totally incorrect when you say that the residential market is entering early death throes.
Auckland will tank but most of the rest of NZ is fine.
Do get sick and tired of people on here thinking that the Auckland market is the b all and end all.
Quite the contrary, rental returns that are positive are had throughout NZ but not Auckland.

You could be right, but.....
It was the Auckland Investor that stampeded into the Provinces when the RBNZ embarked on its misguided discriminatory LVR's. If Auckland gets into trouble, what do you think the investors who have holdings in the Provinces will do if they need to recapitalise their Auckland holdings? Sell......if they can...that's what.....

BogDaddy, you seem to confuse lower sales volumes with lower prices in your comment. Their respective effects on the market are quite different

The low rate is indicative of the slumping residential property market.
A slow down in that market is a disaster for banks because if they don't lend they go broke.
Watch out for more bank sweet heart deals as the market tanks even further.
The residential market is entering its early death throes, so it will be a race to the bottom for lenders.
Watch this space.

Nonsense. "Going broke" is not a realistic outcome for most banks. The rate is simply a cost-driven effort to secure market share from target customers.

Has property lending declined ?

Good question Boatman, actually, to my surprise, bank lending has NOT decreased but the rate of increased bank lending has slowed

"The August figures show there was $6.114 billion of new lending in total during the month, down from $6.312 billion in July, $6.803 billion in June and a stratospheric $7.287 billion in May. The August figure is however still slightly up on the total at the same time a year ago, when it was $5.940 billion"

http://www.interest.co.nz/property/83764/new-reserve-bank-figures-show-m...

And that quote was for 2016 ....

C31 loan commitment data from RBNZ for August 2017 as $5.1b... lower than August 2015 even!

https://www.rbnz.govt.nz/statistics/c31

Oh sorry. My bad. I just remembered an article that showed that lending was moving lower.

It has taken 10 years for the residential market to reach its peak.
The decline will take at least three maybe five years so don't expect the "death throes" to be over in a few months.
The decline will take the form of a very long flat period followed by the decline as vendors get sick of waiting.
There is still to much exuberance by home owners remembering the good times which will linger for some time.
Impatience will eventually come and then the slide will speed up.
It may take a long while to happen but it will happen.

I agree with you BD. Much of the rest of New Zealand will slowly decline in value and rents being achieved like Christchurch is currently experiencing. People will come on this site and deny this but they have committed the cardinal sin of falling in love with their investments and are incapable of being flexible when those investments get into decline.

Gordon I think you will find that the average price in Chch is not declining!
Providing you have bought well and you are positively geared then there is no problem, and it creates further opportunities.

Offer still on the table for you to take up if you have the ability.

You sure about that? Kinda looks like they are according to this:

http://www.interest.co.nz/saving/rental-yield-indicator

You would think with Christchurch house prices dropping yields would rise. Just confirms rents are dropping also. Oh to be diversified.

Depends what sort of investor you are!
If you are not serious about property investment then your returns will be down as you drop the rent just to fill your property.
There are many of these in Chch since the earthquakes thru people owning and renting out As is where is houses.
Professional landlords always maintain their property and normally have them full most of the time.
We have had next to no empty property over the past few years and yes some rents have dropped but others have increased.
Our property returns are from 6 per cent to 15 per cent and average around 9 to 10 per cent on purchase price.

Why would your yield be calculated on purchase price? Shouldn't it be on current value?

That's how most asset classes are judged.

ahh asking a property bull to truthfully state return is like asking a used car salesman if the car had more than one lady owner, you know the answer is not correct so you just smile and walk away

To be sure a sharp rate, and probably loss leading, as many institutions offer term deposits at that rate (arbitrage anyone?) ... perhaps because there's the fish-hook of being premium, having essentially no branches and poor online experience. When they have just $1.3b in mortgages (https://www.rbnz.govt.nz/statistics/g2) and even then don't give the discount to their existing Premier customers (new lending only) I guess it's cheaper to loss lend. They're half the size of SBS and 1/50 the size of ANZ.

Could be right, they probably realise they need to reach a critical mass or get out of the New Zealand market. Not having physical infrastructure costs may give them an advantage on pricing although I think most people would prefer a "full service" bank