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More across the board home loan rate rises announced; the rate gap between banks widens to as much as 84 bps

Posted in Property

Westpac has raised its fixed and capped mortgage rates this morning with increases identical to those announced by ANZ yesterday.

It has also withdrawn its low-rate 'specials', just as ANZ did.

Only fixed rates are being increased. Floating rates remain unchanged.

Westpac's low equity rates are generally 10 bps higher than ANZ's.

One and two year capped rates have also been increased by 10 and 29 bps respectively.

Westpac fixed rate changes Standard (<80%)   Low equity ( >80%)
  New change   New change
  % %   % %
           
6 mths 5.40 n.c.      
1 year 5.49 +0.54      
18 mths 5.85 +0.10   6.45 +0.10
2 years 6.29 +0.70   6.89 +0.34
3 years 6.65 +0.66   7.25 +0.15
4 years 6.99 +0.09   7.59 +0.09
5 years 7.20 +0.10   7.80 +0.10

Westpac's mimicing of the ANZ move raises the chances that the other major banks will also follow suit.

However, it also presents a short-term opportunity to lock in the older lower rates at other banks and there is now a large variation between institutions.

The gap between the lowest and highest one year home loan offers is now 54 bps, the gap at 2 years is 84 bps, and the gap at five years is 65 bps.

The move higher by ANZ and Westpac will make it more difficult to negotiate extra rate reduction at other banks - they are now offering a significant rate advantage at card.

Premium sweeteners may also be harders to win.

See all carded, or advertised, bank home loan rates here.

below 80% LVR 1 yr 18 mths 2 yrs 3 yrs 5 yrs
           
5.49% 5.85% 6.29% 6.65% 7.20%
ASB 4.95% 5.65% 5.59% 5.99% 6.99%
BNZ 4.95% 5.80% 5.95% 5.99% 6.99%
Kiwibank 5.25%   5.65% 6.40% 6.90%
Westpac 5.49% 5.85% 6.29% 6.65% 7.20%
           
Co-op Bank 4.99%   5.59% 5.99%  
HSBC 5.10%   5.65% 6.35% 6.99%
SBS / HBS 5.20% 5.45% 5.45% 5.99% 6.55%
TSB 4.95% 5.40% 5.85% 5.99% 7.00%

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34 Comments

So that's roughly another $1

So that's roughly another $1 billion added to annual house hold interest costs. Probably another 25-50 bps added early next year if the Fed begins tapering. Then add to that rising fuel costs on a weaker NZD. Merry Christmas. 

ANYONE NOTICE THAT domestic

ANYONE NOTICE THAT domestic deposit rates are either lagging or not increasing in tandem?
This equals bigger profits for Banks without producing anyting tangible,  or for any new investment , or anry new lending risk ..... and that menas  bigger divindend remittances to Australian Shareholders.
 

Ultra low interest rates were

Ultra low interest rates were great while they lasted. Now let the good times roll (economic recovery)

4.5% mortgages are hardly

4.5% mortgages are hardly ultra-low
 
How about 1.48% fixed for one year? http://www.moneysupermarket.com/mortgages/

The Landlord is smug because

The Landlord is smug because he says he has fixed his interest rates. What he is not taking into account is the huge number of stupid buyers and investors in Auckland who have borrowed large amounts from banks to buy their first home or their investment property based on todays interest rates. Watch this space. Many will have to sell when the rates go to 8% maybe even higher and then just watch those Auckland prices tip  back. People just overlooked the fact we are on emergency interest rates. The recovery looks stronger than many expected and it is kicking in hard. Time to sell those properties and lock in the capital gains I would have thought.

gordon, property investors

gordon, property investors are not only hedged against interest rate rises by fixing their interest rates.
Property investors earn rental income as well.
You are right... this is a strong economic recovery.
As such, can't see house prices falling.
How many people on this website have been saying house prices will fall? All I ever see is house prices rising, flattening out, rising, flattening out, rising...

YL the simple answer is

YL the simple answer is rising interest rates. You forget like all your mates that we are on all time low emergency interest rates to help the economy survive and recover. Any mug can get into property when interest rates are low and you have a shortage of property such as in Auckland which has caused capital gain.  When interest rates go up 3,4 or 5 percent over a period of time that will sort out the strong and the weak. The trouble is a lot of small businesses that employ a lot of the NZ working population will suffer as a result of the rising rates and will have to lay off staff or even close down. Many small retailers are already struggling in these low interest rate times.  The rising property values which are causing inflation worries are going to bite the country in the proverbial by making the RBNZ increase wholesale rates.  As I said lock in the profits and sell some of the portfolio now.

Sorry gordan, always been an

Sorry gordan, always been an investor. I never sell.
Instead, I pocket the rental income. And I am needing big pockets.

YL you are a typical property

YL you are a typical property spruiker. You all exaggerate your position. You never use your name and you all create a portfolio that probably never exists. When times start getting tougher as they are going to get for property investors with rising interest rates, CGT when labour get in next year and forced sales happening again you all start saying it will never happen to me as I am  not highly geared and my rents will cover it. One can smell the fear on the breath of spruikers again. There are less and less of them on this site and the ones that are still commenting are all in a state of denial. Any investor who says he does not care if the value of his share or housing portfolio drops in value is a liar. We are all ostensibly greedy and we all want our assets to grow in value.

Well said. I also like the

Well said. I also like the word property spruiker. Where did it come from?

Terrific rant there gordon,

Terrific rant there gordon, pleased you got that off your chest.
I am not negative toward property as an investment. The freedom it has offered me and opportunities in life are something I treasure.
You... don't seem to have anything positive to say about anything.
 

gordon, relax. The thing

gordon, relax. The thing about property investment is loads of patience and lots of waiting. Therefore commenting here is a great way to kill some time and learn valuable lessons as well. Like when some commentors hinted that tech stocks was a buy, I should have listened and bought Xero.
I suspect that YourLandlord has a much longer history in property investment than me and therefore in a much more comfortable position.
Commentators here I notice have a wealth of experience which they are actually sharing. It is worthwhile paying attention rather than ranting.

Ok gordon you've got me..

Ok gordon you've got me.. suckered in if you will..
 
With respect I think you are confusing speculators whose aim it is to make as much money as possible in the short term with genuine investors whose aim it is to realise a return over the long term. 
 
I agree with you that no-one wants their portflio to decrease in value. The reason buy and hold property investors "don't care" if values stagnate or go down is because it doesn't really affect them/us (yes I'm one too). Any decrease in value is only realised when a property is sold. If no sale occurs no loss is realised. 
 
Once a property is purchased the expenses associated with owning that property are pretty much fixed but (rental) income will increase over time. Neither of these cashflows are affected by the value of the property and so neither is the derived profit. So my question to you gordon is why would a genuine property investor lose any sleep when the value of their properties go down in the short term? We know about market cycles. We know this will happen from time to time. It doesn't worry us though because we know that over the long term the values will increase - as sure as the sun rises in the morning! 
 
Increasing values are certainly nice but I think YL would agree that a slowing down of the market in the near future is desired by most serious property investors. No-one wants to see a major bust. For what it's worth I still see strong increases in value in Auckland next year. National are talking up a good game to try and slow the market but with such strong economic conditions in NZ it's hard to see property prices doing anything but increasing. 
 
 

Interestingly, house prices

Interestingly, house prices are not used in the inflation measurement used by the RBNZ when Targeting an inflation rate between 1 & 3.
So, house prices could go through the roof, but if the CPI or Inflation rate officially is only .5% then OCR no change or cut.
Inflation is still quite low at 1.4%  -  not exactly a scenario where too much money is chasing too few goods/services. The inflation is mainly from Oil, Utilities, Local Body Rates etc  -  which are all fixed/imposed - not caused by pent up demand by consumers or businesses.
 

Have another puff. Rates wont

Have another puff. Rates wont climb that quickly.

Tim no one knows how quick

Tim no one knows how quick they will climb but climb they will. Those who borrowed based on todays rates will regret their stupidity and sometimes greed.  Loans of $500,000 cost heaps more when interest goes from 5 to 8%.  A friend of mine has confirmed her cousin who had a debt free % million dollar farm (inherited of course) is facing bankruptcy after the bank forced the sale of his farm and property portfolio. He got involved with Richmastery and the rest is history. Was he stupid or greedy or both.

Both. Richmastery turns

Both.
Richmastery turns sensible people greedy and they become stupid

People don't seem to realise

People don't seem to realise that if interest rates go up quickly then both inflation and wage growth are also likely to follow suit. Yes, it'll get harder for people to pay their mortgages, but it won't all of a sudden mean that half of the country's housing stock will be at mortgagee sale.

Interest rates won't go up in

Interest rates won't go up in any meaningful way, they can't. This is just a ploy to lock in as many suckers as possible on fixed rates before the rates drop lower.

Esprit of course half of the

Esprit of course half of the country's housing stock are not going to mortgagee sale. But some will and those few do affect the market. There were reports of first home buyers borrowing up to $850k in Auckland. Now that is just plain stupid. Typical of X and Y who want to live like their parents.

gordon, you will be surprised

gordon, you will be surprised the high wages that these young ones are on. I thought I was going to be put out on pasture due to my age and suddenly the boss gives me a $50k pay increment after 5 years of zero pay increments. Sign of things to come perhaps? Lets get Compulsory kiwisaver to 12% employer and 12% employee contributions to dampen consumption.

Get compulsory kiwisaver

Get compulsory kiwisaver employee contribution to 12%. Easy to say with a 50k salary bump. How do you think average wage earners in many corners of N.Z. would cope with that?

Having actually been a gen

Having actually been a gen X/Y first home buyer earlier this year and been friends with many who have, such highly-mortgaged cases are rare. Yes, I know couples who have $800k+ mortgages, but they're couples who are also pulling in $250k+ combined a year.
 
Yes, interest rates going up increases mortgage stress, and of course will lead to increased mortgagee sales, and yes, the market will plateau and might even come down a little bit.... but like last time, it'll not result in a 30%+ drop in prices, it'll probably only result in a loss of 6 months worth of gains. The market would have to drop almost 30% just to put the house I bought back in March back to the value I paid for it.

Why can't house prices fall

Why can't house prices fall 30%? Other countries have seen falls of that magnitude. House prices fell significantly (inflation adjusted) after 2008 and haven't yet fully recovered.
I think we'll see stagnant prices resulting in real term falls, starting next year. Eventually (hopefully!) we'll see 30% and a return to an affordable, healthy property market.
In Auckland the average house is ~600k and the average income less than 100k, thats a serious imbalance that the market will correct eventually.

"I think we'll see stagnant

"I think we'll see stagnant prices resulting in real term falls, starting next year. Eventually (hopefully!) we'll see 30% and a return to an affordable, healthy property market."
 
What makes you think this rjf? Next year will be the best on record for the NZ economy and you're predicting house price falls..? Immigration is expected to surge. House building is a priority but history shows we won't build as much as we need to - quite simply we don't have the skill base to. Forgive my ignorance but I don't see the connection. 
 
I think increasing interest rates will limit increases in property values but that is a far cry from real term falls. 

Affordability. The bulk of

Affordability. The bulk of the market is made up of people buying property as a home, rather than as an investment. Those people can afford less through LVR restrictions (where have all the first time buyers gone?!) and higher mortgage payments due to the predicted higher interest rates.
Other factors will contribute - increased building activity and mortgagee sales will become more common once interest rates really start to bite.
People are understimating the effect of removing first time buyers from the market. With less demand at the bottom of the market things will start to cease up. Put simply, those selling at the top of the chain will struggle as the buyer in the middle of the chain can't find a first time buyer.
It won't happen quickly, vendors will cling to their inflated prices but eventually we'll reach acceptance and things will change. I expect to see something similar to the post-2008 downturn with inflation nibbling away at prices.

.

.

Dont forget 70% of mortgages

Dont forget 70% of mortgages are floating or sub 1 year fixed.  The kracken a cometh....... pity i just bought ....... (for cash)

This news will slow down the

This news will slow down the housing market more than anything Mr Wheeler and Co could have dreamt of .

Meanwhile, across the ditch I

Meanwhile, across the ditch I just had my loan fixed for 3 years fixed at 4.75% - down from 4.98% few weeks ago.  So, it's not over when until the fat ('straylian) lady sings!

Folk have been peddling -30%

Folk have been peddling -30% hocus pocus since I took interest in this site, cost me a few bob being over cautious and listening to these wizards. Fact is we are in for five years of boom times, we don't have the ability to build homes at the rate suggested, the flood gates are open and they (migrants) keep coming at a rate of 600 a week, all require that roof over the heads. Hang tight for the long term, your a guaranteed winner 

You said it Brendan, those of

You said it Brendan, those of us who took the plunge over 5 years ago and purchased a house on Aucklands North Shore are really now starting to smile. House prices here have done nothing but increase since we arrived in 1974. You just have to be prepaired to do the hard yards for 10 years and kill that mortgage the lifestyle returns are there in the end.

Carlos67, this price growth

Carlos67, this price growth is everywhere in Auckland and not isolated to the Northshore. I have not got any northshore properties and I am still smiling from ear to ear. This is my 2nd bull market market over a 10 year period for many of my properties and did take the opportunity to buy 3 properties in Mt Roskill in 2009  when the market looked really sick and people were bailing out.