The next banks to raise fixed home loan rates are Westpac and TSB.
Even though they nearly complete the latest round of mortgage rate increases, they won't be the last. Far from it. Another round will be starting soon and with increases as large as the recently completed round - maybe more. A lot will depend on how wholesale markets work on Friday.
And that is because Thursday swap rates continued their very sharp increases, and the rises in the past three days are more than enough to guarantee further rises for homeowners.
Plus, there is something of a crisis brewing in wholesale money markets. There is a suggestion that these markets are breaking; there is a shortage of receivers in the market who are necessary to make a deal. Without them, banks can't hedge their risk and if they remain exposed, the risks for bank treasurers rises sharply. This can become a vicious circle for banks and these new risks aren't priced in. Their only recourse is to raise rates sharply to cover that new and unwelcome risk.
It is a very uncertain and worrying time for banks when this happens - and that worry will be felt by homeowners who need to do a deal. For most there is no choice; you either agree to sharply higher fixed rates being offered, being forced on to a floating rate, find an alternative bank (who is likely to be in the same position), or pay the loan off in cash.
Borrowers have suddenly lost all bargaining power.
Broken markets raise the risk of severe instability and the possibility deals can't be done, truly exposing debt positions.
Back at the retail banking end, both Westpac and TSB also raised term deposit rates, with Westpac joining BNZ offering a 3% rate for a five year term.
One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculator which is also below. (Term deposit rates can be assessed using this calculator).
And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options. But break fees should be minimal in a rising market.
Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.
| Fixed, below 80% LVR | 6 mths | 1 yr | 18 mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| as at October 29, 2021 | % | % | % | % | % | % | % |
| ANZ | 4.00 | 3.24 | 3.54 | 3.70 | 3.94 | 5.04 | 5.34 |
 |
3.85 | 3.25 | 3.59 | 3.75 | 3.99 | 4.35 | 4.65 |
 |
3.89 | 3.24 | 3.54 | 3.79 | 3.99 | 4.49 | 4.49 |
 |
3.99 | 3.29 | 3.59 | 3.99 | 4.29 | 4.49 | |
 |
3.89 +0.20 |
3.34 +0.15 |
3.69 +0.20 |
3.99 +0.20 |
4.19 +0.20 |
4.29 | 4.49 |
| Bank of China | 3.45 | 2.69 | 2.89 | 3.09 | 3.39 | 3.65 | 3.95 |
| China Construction Bank | 3.25 | 3.25 | 3.59 | 3.79 | 3.99 | 4.29 | 4.39 |
| Co-operative Bank | 3.24 | 3.24 | 3.54 | 3.70 | 3.99 | 4.29 | 4.49 |
| Heartland Bank | 2.35 | 2.60 | 2.90 | ||||
| HSBC | 3.24 | 2.99 | 3.29 | 3.69 | 3.79 | 4.09 | 4.29 |
| ICBC | 2.99 | 2.89 | 3.19 | 3.29 | 3.49 | 3.89 | 4.09 |
 |
2.89 | 2.75 | 2.99 | 3.15 | 3.45 | 3.95 | 3.95 |
 |
3.14 +0.25 |
3.14 +0.25 |
3.44 +0.24 |
3.65 +0.25 |
3.89 +0.25 |
4.24 +0.30 |
4.44 +0.50 |
Comprehensive Mortgage Calculator
42 Comments
David bringing out a little of the ol' DGM mixed with black swan.
House price raises Good.
Mortgage price raises Bad.
Clearly some Raises are more equal than others...
House price X mortgage rate, both Raising, equals double bad?
Cui bono?
NOW we should be worried. Never mind the principal doubling (in some cases) over the last year. Many people celebrated that. Let's worry now the 1yr from ced interest rate is about to double (from about 6 weeks ago). Orr has to go.
If wholesale markets cease up, he can’t do diddly squat… He will be on the phone a lot though to various other central banks with a little more impact on that part of the market. But will this soon be just one of those moments when you’d be best placed to be completely debt free?
I concur. Whereas very low borrowing rates are a great opportunity to pay down and reduce debt, unfortunately the modern mindset set is often that it is a time to borrow as much as possible (ie cheap money) which is ok as long as you understand the risks which I fear many don't.
Do you mean "rises" ? (your latin is good though)
So borrowers can get a 1-year at 3%.. or a 3-year at 4%.. pretty much.
The 3-year around 4% and the 5-year at 4.5%.. lends to the thinking that 1-year rates are only going up, followed by the 3-year.
Who will be the new marginal buyer in this market?
One wonders if there might be one final FOMO frenzy this summer before rates start rising too much
this is about to get ugly very very ugly.
The RBNZ are also partly to blame for this as are the banks- NZ was far too leveraged on 1 year fixed term loans. In comparison in Australia only 25% of loans are currently 1 year fixed term with 60% been variable loans.
NZ has 70% of loans as 12 month fixed and 80% fixed - what did everybody think was going to happen as these terms expired and interest rates rose;
The RBNZ is in charge of financial stability and this is looking like they have helped generate an extremely unstable situation.
Might as well have allowed everybody just to have interest only loans and borrow against their owner occupied homes to buy investment properties ....oh Wait !!!!
Not everbody on interest only... only forty percent.
yeah forty percent of loans haven’t had to be paid back.... remember that one when you explain to someone in twenty years what went wrong
40%, really?
Last I heard it was 24% on interest only. I very much doubt its a high as 40% but if it is there is some serious trouble coming as that huge capital gain that your counting on over those 20 years may never happen.
The Government and the RBNZ are too blame. The mandate should never have changed and the RBNZ should never have done the 0.75 cut in 2019. Since then, the RBNZ has forgotten its raison d'être (inflation) and instead concentrated on rebranding, flora and fauna, and self-congratulation on its "least regrets" approach. Orr and co will soon be having many regrets. As will many overleveraged people and organisations who haven't actively managed their interest rate strategy. This could be a trainwreck.
Yeah that 0.75 cut was completely unjustified.
You're going to have your work cut out for you over the coming months David, keeping your finger on the pulse here. What a valuable service you provide.
Indeed.
MSM asleep at the wheel.
People told me I was crazy fixing for 5 years in April this year...
2.99% for 5 years ain't so bad.
I saw the US 10 year climbing quickly I think it was Feb or March and broke my loans and incurred monster break fees, then refixed for 5 years 2.99 then the 10 year came back down....I thought maybe I had done it too early, im relieved now! I still cant grasp these bond markets tho, shouldnt the US 10 year be higher and it seems to be falling today even with Powell saying inflation for longer.
The problem there is, any new home buyer might not have had the free cash around to incur those monster break fees. :/
2 years bond rate rising 10 year bond rate falling relative to the the 2 year. Inflation expected in the next 2 years, deflation expected in the next 10.
Inflation created by Covid generated supply constraints not by long term demand. Oil price and commodity price rises leading to higher prices for businesses who will not be able to pass these prices on on an ongoing basis because people will not have the income rises or profits to continue to pay for increased prices. Bond markets telling you that increased rate rises from the US Fed will snuff out growth because the growth generated by govt Covid support payments has filled a spending gap but not been sufficient to generate any kind of wage-price spiral.
Short term inflation followed by unsustainable Fed interest rate rises leading to deflation.
Treasury Inflation Protected Securities (TIPS) as at 30/9/21 5 year -1.53 10 year -0.85
If I read it correctly for the next 10 years this market is telling you that you will be earning a negative real rate of interest on your money. I don't see this as a growth situation.
4th march for me -- 2,99 for five --- there was simply no more downsides and at best it was fractions --- and heaps of risk for upsides - wonder if we will stop feeling so smug anytime soon ----- Yeah Nah
yep we got 2.65 for three years and then we done and dusted on the mortgage front. Spent the last two years paying as much as we could off. Meanwhile some friends were borrowing 500-700k against their houses and buying baches and upgrading to bigger houses. Kept thinking maybe my strategy was wrong, and had a bit of FOMO, but stuck to our guns. But reckon we sleep a lot easier.
Solid 👍.
Smart. Nothing wrong with battening down the hatches when a storm is coming. You may not know the day or week but it is coming.
Frugality is something that escapes many middle-upper middle class NZers. There seems to be a mindset of "I deserve a nice car, holiday, designer sunglasses......" Forever on the rat trap spinning around.
Couldn't have said it better. The excesses in our way of life are vastly unsustainable and we will need to change whether we like it or not. Financially, environmentally and in relation to available resources.
But its not the end of the world, our grandparents often lived extremely frugally but also lived full happy lives. My grandmother lived on her own in a very small house, had a few chooks, garden and recycled or re used EVERYTHING!
The greed/envy monster has got many in its grasp but peoples priority's may well change very soon.
Yes and the older generations, at least the GI's in my experience with them, we much nicer than my experience with our generations that have followed them.
Although I've just finished reading the 4th Turning and it expects that millenneals will be very similar to the GI's. Who will have witnessed this insanity and whose purpose is to change it for the better for future generations.
"Who will have witnessed this insanity and whose purpose is to change it for the better for future generations".
Let's hope so.
Me too. Nice.
This could very quickly become a Train wreck. I still remember what happened after the GFC when the banks really tightened loans as the wholesale markets clamped up. There were a bunch of small developers that struggled to refinance and had to sell properties.
History doesn't repeat but it rhymes.
yes -- but rates dropped from around 10% to 3% very quickly which eased teh pain massively for the majority of homeowners and although getting money was harder -- paying for it was infinitely cheaper!
Also interesting to keep any eye on the 2 year Bond rates in Australia. It would appear that the RBA has given up trying to keep that rate at 0.1%. Although there is little press about this. I guess they can control things until it gets to expensive.
The fact that inflation is surging and Reserve Banks are sitting on their hands makes entering a swap rate contract risky for the counterparty. The market isn't broken, it's a fair representation of the risk involved.
Can anyone see Orr rolling out a new/extended FLP to banks? Would banks take it up now given the situation...
No- The FLP adds to money supply - the problem isn't money supply - its wholesale markets and their calculation of risk and their willingness to swap existing money supply at the current interest rates been paid. The wholesale markets are betting interest rates will rise and so want a premium on the amount of interest they get on the loan swap.
Extending or adding to the FLP would just make the problem bigger there would be more money that would need to be swapped down the line as initial interest rate terms expire.
The wholesale market issue wont fix itself until markets get some certainty around
1. Inflation - how high will it get
2. What central banks intend todo around inflation ie how high will they lift their official cash rates
until that occurs (which is likely to be sometime in 2022) there will be a reluctance by wholesale markets to just accept any old interest rate - meanwhile it leaves those with expiring loan fixed terms vulnerable to a volatile interest rate market.
Thanks! Great explanation.
What's the problem?!
That 30-year Mortgage you have that's becoming a tad onerous? Just be recalibrated at 50 years, and if that's not enough, make it 100!
(NB: I think the Swiss have 100 years mortgages available, and maybe even the Japanese)
I think Japan goes up to 150 years.
I haven't worried about interest rates too much as I have a high repayment rate. My next refixing will be at the point where I only have 10 years left on the mortgage. There are people worrying about breaking fees and fixing longer terms but I had similar worries about my aggressive repayment rate. Naturally I could have got higher returns investing that money but I mitigated the interest rate risk.
All mortgages are denominated in dollars. If you owe less dollars the interest rate increases have a lower impact.
can someone explain why the banks are not using the funding for lending program to keep these rates down?
I'm not an expert here but it might be to do with the short duration that the FLP is effective for and the need for the banks to balance the duration of their asset/liability portfolios over a much longer time frame.
i.e. FLP is only effective for a few years but they have mortgages for 30 years which they need to protect themselves against interest rate risk wise.
https://docs.google.com/spreadsheets/d/1xyN8stTcpPxEVEaXHKggCbC9onXw2bl…
basic spread sheet to see what you think future rates will be before it makes it worth locking in for a longer term.
DP
I strongly recommend that all depositors do not invest in any term longer than 6 months. Let's wait and enjoy fixed rates going higher and higher. Swap rates curves are nicely steepening by the day. In a few months time most deposit rates will be much higher than now. Moreover, the less money is invested on longer periods, the higher most swap rates will have to go. It is a savers' market now and savers should exploit this to the maximum.
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