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Kiwibank has reduced its four and five year fixed mortgage rates by 29 bps and 19 bps respectively, effective immediately.

This move is the first by another bank to respond to rate reductions by ASB late last week, and these Kiwibank reductions match the ASB rates for these terms. Both banks have opened up about a 0.25% advantage over other banks for longer term rates.

ASB’s earlier moves down for shorter term fixed mortgage rates matched Kiwibank and the rest of the market.

With a growing realisation in moneymarkets that official rates will be lower-for-longer, both here and in Europe / USA, wholesale swaps have been trending lower as are the 90 day bank bills. This is opening up some margin that can be used to compete for mortgage market share.

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ASB and Bank Direct have lowered key fixed mortgage rates, bringing their five year rate down to the lowest level of any of the main banks.

Their new five year rate is now 8.50%, down 0.25%.

This gives them at least a 0.10% advantage over The National Bank, the closest other main bank. Westpac and ANZ are still at 8.65%, and BNZ is at 8.75% for a fixed five year term.

Only HSBC has a lower 5 year rate. at 7.99% for their Premier offer, which has specific conditions that apply. Kiwibank is at 8.69%, TSB is at 8.65, and SBS Bank is at 8.75%

ASB also lowered its 4 year rate to 8.20%, also the best 4 year rate by a bank.

Its one year fixed rate fell to 6.25%, bringing it in line with most other banks.

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State-owned Kiwibank has cut its variable mortgage rate by 14 basis points (bps) to 5.65%, making it the second lowest bank variable rate behind BNZ’s headline Total Money rate of 5.59%.

At the same time, Kiwibank hiked its 18 month mortgage rate by 10 bps to 6.49%. See and compare all mortgage rates here.

While fixed mortgage rates have been rising in recent weeks, variable rates have remained stationary at the low end of the mortgage rate curve. Kiwibank is the first bank to change its variable rate this year.

Variable rates are likely to remain at their lows until the Reserve Bank of New Zealand (RBNZ) decides to start increasing the Official Cash Rate (OCR) off its record low of 2.5% later this year. RBNZ governor Alan Bollard said on TVNZ’s Sunday Q&A that the bank was sticking with its expectation that it would raise the OCR around the middle of the year.

Many home owners are now opting for variable mortgage rates rather than fixed rates. For more, see here.

SBS Bank has raised its one year mortgage rate from 6.25% to 6.35%, and its two year rate from 7.25% to 7.30%. The move follows Westpac, which raised its one year rate to 6.29% earlier in the week.

See and compare all mortgage rates here.

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Westpac New Zealand has increased its 1 year mortgage rate to 6.29% from 6.20% and has raised its ‘capped’ 1 year rate to 6.55% from 6.20%. (Update 1 includes SCBS rate hikes.)

This lifts Westpac’s standard 1 year rate above ANZ on 6.20%, above National on 6.15%, above Kiwibank on 6.25%, and above BNZ on 6.25%, but it remains below ASB on 6.55%.

Meanwhile, Southern Cross Building Society (SCBS) hiked its one and two year mortgage rates by 20 basis points to 6.10% and 7.10%, respectively.

See all mortgage rates here.

The average bank 1 year mortgage rate has risen from 5.6% in July to 6.25% as banks lift their fixed mortgage rates to match their higher funding costs. They are competing hard to raise deposits locally by increasing term deposit rates well above the record low Official Cash Rate (OCR) at 2.5% and are also having to pay more for scarcer funds on international wholesale markets.

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ANZ has said its ‘Standard’ variable mortgage rate customers currently paying 6.45% are able to move down to its 5.69% ‘Simple’ rate, after the bank removed the 80% loan-to-value ratio (LVR) requirement for the Simple rate. However, borrowers who have a LVR over 80% may still be subject to a ‘low equity premium’ between 0.2% and 1.25%.

ANZ said it would contact customers currently on the 6.45% rate to advise them of the change. Subsequently, customers can also change their rate by contacting the bank. New variable rate customers are able to pick the 5.69% rate.

See and compare all mortgage rates here.