Hard on the heels of sharp benchmark bond yield rises overnight, BNZ has announced new higher fixed home loan rates, matching some of the new higher ANZ rates in the heart of the competitive zone in their rate cards.
BNZ have gone from having some of the lowest big bank rates in the 12/ 18 / 24 month portion of the market, to now having the equal highest.
Their one year fixed carded rate is up +56 bps to 4.55%. Their 18 month is up +55 bps to 4.90% and their two year carded rate is up +56 bps to 5.25%. ANZ no longer has these levels on their own.
Given the speed and relentlessness of recent swap rate hikes, it won’t be long before all the other big banks join them.
BNZ did not announce term deposit rate increases at the same time.
The one thing this latest hike shows is that Westpac now has the lowest rates, and by some margin. Westpac’s advantage at the time this item is published is 56 bps at the one year term, and significant across all terms. It is unlikely a position they can hold much longer given the margin compression this requires in the face of those sharp wholesale rate rises.
Update: Westpac has raised most home loan rates by +20 bps. After this update, they remain aligned with ASB and Kiwibank for many key rates, but lower than ANZ and BNZ. They did not raise term deposit rates.
Since the beginning of March, wholesale swap rates have risen more than +80 bps. Since the beginning or April they are up more than +25 bps. And given the further push higher overnight, those rises are sure to build by the end of today’s financial market trading.
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 April 20, 2022 | % | % | % | % | % | % | % |
| ANZ | 4.65 | 4.55 | 4.90 | 5.25 | 5.55 | 6.35 | 6.45 |
 |
4.49 | 4.19 | 4.75 | 4.95 | 5.29 | 5.89 | 5.99 |
 |
4.39 +0.20 |
4.55 +0.56 |
4.90 +0.35 |
5.25 +0.56 |
5.45 +0.20 |
5.79 +0.19 |
5.99 +0.19 |
 |
4.45 | 4.19 +0.20 |
4.85 | 4.99 | 5.45 | 5.79 | |
 |
4.39 | 4.19 +0.20 |
4.69 +0.20 |
4.99 +0.20 |
5.29 +0.20 |
5.59 +0.20 |
5.69 |
| Bank of China | 4.15 | 4.05 | 4.35 | 4.55 | 4.75 | 5.15 | 5.35 |
| China Construction Bank | 4.15 | 4.25 | 4.50 | 4.90 | 5.20 | 5.65 | 5.90 |
| Co-operative Bank [*=FHB] | 3.89 | 3.79* | 4.49 | 4.79 | 4.99 | 5.45 | 5.79 |
| Heartland Bank | 3.49 | 4.05 | 4.25 | ||||
| HSBC | 4.09 | 3.95 | 4.54 | 4.79 | 5.19 | 5.39 | 5.69 |
| ICBC | 4.15 | 3.99 | 4.35 | 4.50 | 4.85 | 5.05 | 5.25 |
 |
4.49 | 3.99 | 4.39 | 4.55 | 4.69 | 5.19 | 5.55 |
 |
3.95 | 3.95 | 4.55 | 4.85 | 4.99 | 5.45 | 5.65 |
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81 Comments
They dont fund fixed home loans with the OCR (because that would be nuts, funding at a variable rate and receiving interest at a fixed rate), they fund it with swaps on the wholesale market... and as the article states, these are razor thin margins right now. Retail rates would typically be higher relative to swaps.
Just got back from surfing. Ok . So where are we. Oh yes.
If those rates look bad then check out the Standard rates, for Standard People.
https://www.interest.co.nz/borrowing KiwiBank 5 year, 6.79%
7% interest rates this year, Guaranteed. Very Soon . Maybe next Month.
Many borrowers when looking to refix, may find their equity on desktop valuation has dropped to below 20%. In this situation if the bank is looking to reduce their higher risk segment of loan book, they will inform you, that you no longer qualify for the special rates.
That's highly unlikely for a number of reasons.
Borrowers refixing now likely first fixed April 2021... valuations now are still materially above those levels. It's a stretch to say MANY.
Also, this is really just a paper valuation which banks dont typically refer to unless there is a credit event - like a top up or maybe interest only request. It will mean though less likelihood of moving banks.
BNZ joins ANZ pushing fixed home loan rates higher as the relentless rise in wholesale rates compresses bank margins faster than some of them are responding.
So basically, now Mr Orr has no control as interest rates will go up as funamental is catching up and he is bound to incresase the OCR - like it or not to avoid looking a bigger foll than now.
Robertson and Orr can blame the world, USA - forgetting that those countries may still survive as has Big and diversify economy unlike NZ where everything is in one basket - housing.
That's a good example of how far rates have moved, and how fast. I fixed 5 years last May for 3.19%, just missing the 2.99% rate. You're 4.95% in December, and very shortly everything 5 years will be 6%+. Some say 7%, although I'm not sure about their commitment to this figure. So rates have more than doubled inside a year.
Personally I'm preparing for a 30% property market drop, and anything less and I will count NZ very fortunate. It sounds like a staggering amount but it means my property will drop back to somewhere around December 2020, which doesn't worry me at all since I've never bought for CG.
I truly feel for FHBs who bought during The Mania though, I hope they can look at their house as a home, not an investment, and can appreciate the non-financial benefits of owning your own home. NZers' image of property has been corrupted over so many years they've forgotten its primary purpose.
Agree that with so fast and so high jump in interest rate in such short time, many if they do not bleed will still struggle with higher mortgage rate as, when they bought last year paid a bomb and mortgage outgoing was high, not because of interest rate but for high amount borrowed so were already tight.
....and especially when the so-called experts encouraging them into this said keep your fixed loans to one or two-year terms. Anything longer than this crazy, as we are headed for zero or negative interest rates, so at 2.5% you could be way overpaying in terms of interest. Those losers that fixed for 3% for 5 years will be ruing the day they did that when finance rates go to zero..........wait, who is laughing now? These poor souls are going to be rolling out of their 1-2 year terms into 8% floating or 10% for fives years soon enough. Where are those experts now?
well they said they stress tested at 7%, but by the amount of panic that the rates are going to touch 7%, I wonder just how deep they went in that stress test. Maybe they thought it would never happen so just glossed over the numbers (both the lender and borrower)
I have this half formed thought:
-> cpi will come out in a few days, and is rumoured to be 7%ish
-> the psychology of inflation is fueled and embedded (if not already)
-> ocr rises, that puts a squeeze on banks margins
-> passed on through interest rates
-> passed into everyday spending
-> housing market suffers, deflation in house prices
-> house prices falling results in delevering and reduction of credit, so less dollars moving through the system
-> cpi (in 6 months) is expected to rise even more, but turns out being lower than expected
"a 7% mortgage with inflation running at 2-3% is an entirely different ballgame to a 7% mortgage with inflation at 10+%"
Is that what you mean about inflation running at 2-3% with a 7% mortgage? this is what i think might happen too, where inflation runs hot, and gets aggressively corrected back the other way that it makes it even harder for those who are levered. double trouble.
Volatility in inflation and deflation, where one market is massively deflating and another might be inflating at the same time, with the added difficulty of trying to measure one market with the length of a carrot, and the other with the width of a potato, and trying to compare the two.
Yip, double trouble alright. A good solid 1 - 2 combo from the RNBZ...
The thing with inflation is that we don't ever correct it, we just slow the increase.
So poor ol' mortgage holder is stuck with massively increased costs on non-discretionary spend such as Food, Power, Rates.
Then boom. To slow (Not reverse) the inflation we hit them again with increased mortgage rates.
Finally along come Central Government with the unexpected king hit to make sure they stay down. Open the border to mass immigration to stem the tide of wage inflation.
Aroha...hugs....kisses...
People can handle the 7% if they have to but at that point you become a total debt slave. All your discretionary spending is gone and you are on an existence lifestyle and the current generations simply cannot handle it so there will be massive capitulations. The number of listings in Tauranga has now doubled in a matter of a months so people can see the shit storm coming but have left it way to late to bail out of the market. Those that are highly leveraged are now shitting their pants. All sorts is coming onto the market now including empty sections that were "Land banking" investments.
Not necessarily for down here in Tauranga the Vendors and RE's are still on the cocaine and champagne. The question for me is how long will it take for the flow on effect that's now evident in Auckland to flow onto the regions. I'm expecting it to take quite a few months and the falls will not be as dramatic either. By the time we finish still going up down here and then going down we could still end up with single digit gains down here YoY. Fully anticipating the prices to fall to the level of the new RV's instead of $200K to $300K over in some cases.
“All your discretionary spending is gone”
Petrol for weekend day trip - $80
weekend eat out -$80
Takeaway meal for the week- $50
weekend drinks / bars - $60
Coffee/brunches -$50
Miscellaneous- $100
A guesstimate as I personally don’t drink. That’s $400+ per week.
Sorry business owners, bad times ahead.
The banks will be more able to up TD rates as the 2 & 3% mortgages roll over in the next 6 months. In the meantime have a serious look at Rabobank if your saving. The Kiwibank 90 day notice saver at 2.15 is also a good short term park while waiting for the 4% TDs to return.
TD's are simply not moving and I'm not sure why. About to get my second months payment in 4 days and the rate still has not shifted from 2.3% for 12 months. Cheaper money must be coming from elsewhere, they are not interested in raising short term rates or else they think this is really a "blip". Strange times indeed.
No thanks perfectly happy where I am thanks. If the FLP lending ends in December 22 and my TD comes out in Feb 23 it should be well placed to suddenly double to 4.6% rates the way things are going. Looks like I'm finally on the right side of history when it really counts.
I hope it doesn't get through, too.
If we must bail out the banks then let us do it in the style of Iceland. Equity/ownership for bailout, not such a no-strings-attached "just put it on the younger taxpayers and keep our investments and bank profits hunky-dory at their expense" style.
Yeah, The Church said on the Oneroof radio show a few weeks back that the market has just lost “confidence” at present and things would be back to normal in a matter of weeks, maybe months.
You would say such a thing if you were a ‘confidence man’ who had been preaching to a country via mainstream media for years that it’s house prices would never crash.
Right now it looks like the OECD, IMF and anyone without a vested interest was right all along - having the highest house prices in the world was unsustainable and severely vulnerable to interest rate rises.
You would think so. There still seams to be some buyers out there proping things up. However all the call signs are there for a drop in prices. I have seen several houses in my area "disappear" off the market. Where overnight the sign goes and the listings on trademe and the agents website vanishes. It will only pop up on the random Chinese sites.
In 2007 there was a financial crisis. However the effect on the NZ property market wasn't fully apparent until 2009 even 2010. There is always a lag with these things. I think overtime the market will slowly become saturated. Then the banks start to get a bit antcy and quitely apply pressure on people to sell. Then all of a sudden you hear of deals from your friends. "Did you hear the property on street xyz sold for 1.7million". You scratch your head "but I though they wanted 2.5?" Your friend responds "apparently they had to sell, they only had one offer in front of them, apparently there was a guy wanting to go conditional for 1.9, but the banks pressured them to take the unconditional offer at 1.7".
Agents also get really slimebally. They will start trying to offload the deals to their "buyer friends". As in a buyers market it is the buyers the agents care about. I got talked out of a property in 2010, the agent basically laughed at me when I said I wanted to pay $xxx for a property so I didn't make the offer. I found out 6 months later that it sold for less than I would have paid. Always put your offer in writing......
Good point. Income growth has been around 10% since 2015. That doesn't explain house price increases since then (~100%), so I don't think that de-bunks my hypothesis. Also, since we are discussing other factors, I'll throw in that we haven't reached peak interest rates yet, they are likely to peak higher than 2015 levels. Unemployment just gives the RB more confidence to continue hiking rates.
Both median and average earnings are up by much more than 10% since 2015. Try 20 - 40%, depending on the measure.
E.g.
https://www.stats.govt.nz/information-releases/labour-market-statistics…
2015 median weekly income: $581
2021 median weekly income: $770
or for income from salaries and wages:
2015 median weekly earnings: $884
2021 median weekly earnings: $1093
Of course it doesn't explain all of the house price increases since then - but it does explain some of the increase. I think from your theory above you could say that prices could fall back to about 20% - 40% above 2015 prices. But there are other factors to consider too.
SME's employ approx 600,000 New Zealanders. The majority of these a privately owned businesses. Many use their owners personal assets as collateral for business lending. WHEN these interest rate rises cause demand to contract. Many of these businesses will lay off workers. My house or your job?
so.. when they captured a german tank somebody asked a mathematician to estimate how many tanks germany could have. The mathematician doubled the number in the tank plate, and that was his bet. At the end of the war it looks like he was wrong of just 2 units.
That is a principle that many statisticians follow.
Assume that all the "unknown" factors average each others.
So, summarising, yes, you are correct, your prediction is the one that an honest statistician shold go for. You only need to specify it is in real terms, not nominal.
If you saved that extra interest, and anything else you can spare for the 6 months , then make a bulk payment when the term expires , you will probably be better off, even taking into account you may have to fix for a higher rate then.
Long terms for security , short terms if you want to save hard , and pay as much as possible when your term come up for review.
Hmmmm
i have been thinking the same, but as per the comment below, not insignificant penalties on breaking…
at the same time, while my forecast of a peak OCR of 1.75 will probably be wrong, I still back the ‘spirit’ of my forecast. I still think there is an even chance that OCR will peak no higher than 2.5% later this year, and then be cut back to somewhere around 1 to 1.5% by mid next year once the recession has well and truly set in.
so, on balance, rather than refixing now, I think I will come off fixed in November and go to floating, and be anticipating fixing again in mid 2023 once rates have dropped again.
Look at the 10 - 15 year average of whatever rate term. Use this and then test yourself at 1 standard deviation from the average, then 2 deviations. Over the past 3 years the rates sank below 2 deviations down below average - only 1 way to go then. I hounded my kids to fix as much as possible for 5 years round 18 months ago - silly old man they mumbled but did some. They cant believe what is happening but are just wishing they had fixed more.
Next old man advice is to use this opportunity to get more debt paid off - don't buy more stuff. Plenty of years to accumulate useless stuff. Inflation will be reducing their debt as well in real terms so a double win.
I have worked for some big investment funds and everything was based on returning to long term average trend over 2 to 4 years. The average is there for a reason. Test yourself on deviations either side of it. These funds were and still are VV successful.
For the first time ever I've been putting my seventh-form mathematics to good use, particularly the binomial and other various statistical theorems. I've been working on this project for a few weeks now and i've come up with the following universal formula for the use of FHBs.
" The value of housing is directly inversely proportional to the sum owed in mortgage repayments for the same house."
This will leave FHBs in exactly the same financial position as they were before house prices started falling.
My formula has the benefit of being both elegant and simple.
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