Kiwibank cuts mortgage rate to 5.4%

Kiwibank cuts 6 month mortgage rate to record low 5.40% from 5.75% until end of April; floating mortgage unchanged at 5.65%

14th Apr 11, 11:29am by Bernard Hickey

Kiwibank has announced a new 6 month mortgage special of 5.40% until the end of April.

Its previous 6 month mortgage rate was 5.75%. Kiwibank left its floating rate unchanged at 5.65%.~~5.75~~%.

This is a record low mortgage rate offered by Kiwibank since it launched nine years ago.

"We have launched a couple of short-term specials this year and they have proved very popular attracting new business and also giving customers the chance to lock in a great rate and have some certainty in uncertain times,” Brock said.

Kiwibank's 5.40% rate is the lowest in the market except for HSBC, which offers a 4.99% deal to 'Premier' customers who borrow more than NZ$500,000 and buy insurance through HSBC.

Brock told Interest.co.nz in a double shot interview with Gareth Vaughan last month it was borrowing hundreds of millions of dollars offshore from the European Commercial Paper or 'hot money' markets at 90 day terms. See the interview above.

See all mortgage rates here

(Updated with link back to interview detailing foreign borrowing; correcting second reference to floating rate. Correct rate is 5.65%)

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31 Comments

by Wolly | 14th Apr 11, 11:32am 1302737526

In you come suckers....sign here and here...have a nice 6 months...see you when the rates rise...hahaha

by Snarlypuss | 14th Apr 11, 11:39am 1302737951

15 days to take advantage of this 'deal'! After that the rates will most likely be ...lower again." If it isn't selling, reduce the price", applies to anything. Whether it be clothes cars or debt. Then at some stage when "they've got you" and rates finally do rise, the banks will kindly allow you too keep your repayments 'unchanged'... "but we will have to extend the term of your indebtdness form 30 to 40 years, though....."

by Andy Rodgers | 14th Apr 11, 11:40am 1302738050

Kiwibank's strategy is obvious. It is enticing borrowers with teaser rates so that it can reach the "too big to fail" category. Unfortunately for NZ taxpayers it will probably work. The Chairman, Cullen, and the CEO, Brock, will be the winners with their bonuses and exit payments.

by Gavin Jones | 14th Apr 11, 11:48am 1302738491

For once I see a bank which is passing on cost savings to clients. I say "Well done Kiwibank" I am certainly considering changing over to them as their track record to date of leading the way has been excellent. Beats sucking up to a Foreign owned bank!

by John Kelly | 14th Apr 11, 1:22pm 1302744161

Absolutely Gavin, well said. Even if overseas markets become tricky, there will be plenty of Kiwis, like me, who will buy Kiwibank bonds if they are well priced.

The foreign banks can take a hike, they have caused us enough strife already.

by Bernard Hickey | 14th Apr 11, 11:54am 1302738892

Quick question for a government which wants to reduce foreign debt and reduce some of the heat in the housing market:

Why is a government-owned bank further worsening New Zealand's vulnerability to 'hot' foreign debt by borrowing hundreds of millions so it can shovel it on to homebuyers at discounted rates?

The IMF warned last month that New Zealand's banks currently have to roll over debt every 90 days that is worth 50% of NZ GDP.

What happens if the markets freeze again?

cheers

Bernard

by Les Rudd | 14th Apr 11, 12:12pm 1302739974

Because, they can.

Because, there is no regulation that defines a prudential ratio of foreign to domestic funds, hence we import loose monetary policy from overseas that undermines our own policy, along with domestic savings, debt restraint and appropriate value and volatility dynamics of our currency. It is however a free country, for now.

Here's another question, who said this?

"But these exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are and ought to be restrained by the laws of all governments."

Cheers, Les.

www.mea.org.nz

by Gummy Bear Hero | 14th Apr 11, 12:21pm 1302740483

Very good question , Bernard ........ The state's bank is encouraging us to rush out and buy more property .

....... Bloody bizarre scenario , that .

And so nice of the government to find a comfy chair for that failed finance minister , from the previous administration . ......... . All nice and dignified , straight out of the annals of " Yes Minister " .

by steven | 14th Apr 11, 12:39pm 1302741592

Google is your friend....

Interesting answer...

regards

by steven | 14th Apr 11, 12:32pm 1302741159

What Kiwibank's exposure to foreign money as opposed to the OZ 4? I thought it was substantially less?

btw I dont think its "if"...

its When, and I dont see it being medium term....just look at the state of the EU....piigs, we now have 3 on life support, ireland wants to default and Greece certainly does.....

Hence why I assume the RBNZ and the UK (anyone else?) is tryting to get retail banking seperated from the whole bank...I assume this would allow eftpos to keep going even if the global financial system froze?

I thought they were a or like a SOE, ie had board independance to operate in a commercial way......so they are doing a teaser for 6 months....or possibly they think things are so bad the OCR is coming down....if thats the case Im not so sure they are wrong.....but Im tempted to go for it except my mortage is so small that Im going to save not even $100....

regards

by steven | 14th Apr 11, 12:37pm 1302741466

I just did the kiwibank loan calculator...im allowed a 95% mortgage and could borrow over $400k........

lol

no way....

regards

by Asymmetric Informant | 14th Apr 11, 1:52pm 1302745956

Holy Spit!

Well I'm going to take their boilerplate seriously about it not being an actual offer ;)

Still even the thought of giving $600k + worth of loans to someone my age is criminal.

No wonder the cost of housing is spiralling out of control.

by John L Walley | 14th Apr 11, 12:25pm 1302740735

And don't forget what all this does to the exchange rate, the RBNZ might be happy where the US cross is but it is an unhappy time for those who take significant sales from differentiated products and services in USD markets.

Madness...

www.johnwalley.co.nz

by steven | 14th Apr 11, 12:48pm 1302742090

Easy, the US is a zombie, go into asia for future markets.

regards

by neco | 14th Apr 11, 1:30pm 1302744654

We export to a number of Asian countries and don't have a single customer who doesn't want to trade in USD. Maybe they want to recycle the USD coming there way from their own exporters... You will also find that the market for finished products with significant value added is not that great in Asia (excepting Japan & Korea), they are more interested in raw materials to which they want to add value themselves.

by Roger Witherspoon | 14th Apr 11, 5:45pm 1302759902

Yes, it makes you wonder, doesn't it John?

They apparently desire a high exchange rate to combat inflation, and an increasing indebted and servile citizenry.

Sinecures are just not a good look are they?

by Berend de Boer | 14th Apr 11, 12:25pm 1302740759

Why they are doing this? Because you get bailed out if you fail!!!

So risk is zero, growth is the only thing that matters.

by fmr ca | 14th Apr 11, 12:58pm 1302742729

Does anyone know what the average new mortgage is? I imagine they are a lot bigger in Auckland than the regions. Quite scary to think the whole housing bubble could blow up again. We don't seem to be very smart at learning from the GFC. Perhaps we have been artificially shielded from the consequences of borrowing from offshore to buy each other's over priced houses. Doesn't bode well for future productivity of NZ.

by Roger Witherspoon | 14th Apr 11, 5:57pm 1302760662

It wasn't really a housing bubble, it was and is a debt bubble. The effect is we are each more indebted than we were, either from our own borrowings or via the government borrowing on our behalf.

I do find it offensive that Michael Cullen has any positions of responsibility, particularly at Kiwibank.

He is the man we booted out and the man who fell asleep at the wheel when this problem was being created. As finance minister he was the person most directly culpable for the increase of indebtedness of the citizens of New Zealand. By his slight of hand he passed the debts of the government onto the private sector, encouraged the growth of that debt and destroyed the functionality of the country by growing the government sector to an unsustainable size.

by Wolly | 14th Apr 11, 6:23pm 1302762181

You didn't count on the old pollies network did you Roger...Key nearly fell over himself in the rush to give Cullen a fat salaried job.

The really funny thing is all the Labour die hard supporters are too bloody thick to realise Cullen and Clark made Turkeys of them....they are the fools left worse off than they were before.....

by Trolleyboy | 14th Apr 11, 7:09pm 1302764968

Hell, yes. I can remember Cullen standing behind every punter who bought a wide screen tv, or borrowed money for a house, forcing them to do it.

What happened to personal responsibility? I thought the that the idea that we had to blame the government for everything died in the 1980s?

Don't those who borrowed the money to build up the mountain bear responsibility for it?

by ruru | 14th Apr 11, 1:20pm 1302744005

Bet you can't get the offer in Christchurch.

by Gavin Jones | 14th Apr 11, 2:24pm 1302747841

So many of you here are so focused on house prices that you simply have blinkers on to other realities. What you should be far more concerned about is the rapid devaluation of the money supply.

That is why Kiwis in general love property. It is one of the good options for prudent long term investment. NOT the only one, but one of the easier ones to manage. (sure there can be hassles, but making money always has its fair share of those)

It is actually more about money devaluing than house prices going up. It simple takes more of a devalued currency to buy a well located property.

by Snarlypuss | 14th Apr 11, 2:35pm 1302748558

Or, Gavin, less of a revalued currency if debt is repaid . That's deflation of the money supply. Ask yourself: "What are most people/many Governments doing today with debt?". My answer is : "Repaying it". That's what makes currency more valuable over time, and assets worth less. "Inflation" only works if wages in the community rise ( to pay off a diminishing nominal debt) but how does that happen in a world awash with unemployed people? Ours at 6.7% and tipped to rise....

by Tranny | 14th Apr 11, 8:08pm 1302768483

Good on for kiwibank for bring down the mortgage rates. The smart person with a mortgage would move it to kiwibank and use the lower rate to reduce their debt quicker which would mean the country would be out of debt quicker as well. Do we see the aussie banks doing this. NO! They would rather see us stay in debt so we can line their pockets and keep up their standard of living and entice our docotrs and nurses over there with their higher salaries. I say to keep it up kiwibank.

by steven | 15th Apr 11, 9:47am 1302817623

I moved 8 years ago and have been saving 100 to 250 basis points ever since....Funny but despite all the snipes Kiwibank has proved good value for me and the ppl I know. As a plus of course the big 4 cant charge what they like so even the big 4's customers are probably saving due to kiwibank...

regards

by Your Landlord | 14th Apr 11, 10:04pm 1302775442

Does this mean Mr. Cullen will now become a "rich prick"?

by Snarlypuss | 15th Apr 11, 8:57am 1302814673

Their rates are not all they're cutting! "It is reported up to a hundred people may lose their jobs. Self-service machines are likely to replace people at New Zealand Post and Kiwibank outlets around the country." These lost jobs are not all Kiwibank, but shared with NZ Post staff...but it's more unemployment for New Zealand...everyday...Maybe these unemployed Kiwibank staff could apply for a cheaper home loan?

by steven | 15th Apr 11, 9:58am 1302818328

I think the term that jumped to mind is luddite......I dont see the point in keeping a semi-skilled person in a job where they can be replaced by a more efficient method, its known as improving productivity. If ppl dont like it well they should complain or move to a bank that gives them the service they want, and of course put up with paying for it.

Well over a decade ago I determined the best job security I could have was be highly skiiled, keep and expand my skills and have those skills in an area in high demand and always be ready to move jobs or skill areas if the present situation looked dire or it looked better elsewhere...

regards

by forgot where y… | 15th Apr 11, 10:07am 1302818860

Only problem is of course National said they would look at selling Kiwi bank in their second term.

I liken Kiwi bank to a house brand in the grocery industry (Pams, Budget etc) it keeps the multi nationals honest keeping retail price points lower than they would be if there were no house brands.

Remember back to a time when there was no Kiwi bank . Bank fees were climbing and the Aussie banks just kept on raising interest rates there was no one to keep them honest.

John Key needs to remember where he came from.

by Steptoe | 15th Apr 11, 10:20am 1302819606

Some how I think most of yopu miss the obvious..

Currently there is a huge market in buying rentals, a little run down...pick it up cheap, throw a few grand at it wiith a short term loan...revalue, buy another rental.

The low 6month is just a marketting ploy that suits these investors, changes them from the other banks, and tends to keep them.

Interst rates really have no where to go but up, and thats not going to happen in the next 6 to 9 months , or if it does, will not be significant....but they will go up after that , and kiwibank will have an even larger customer base.....and despositors.

It is no more than a marketting ploy, not much different to supermarket sales at cost or less, to draw in customers for future sales.

Good on Kiwi bank....