sign up log in
Want to go ad-free? Find out how, here.

BNZ hikes Total Money variable mortgage rate to 5.74% from 5.59%, but cuts 6 mth to 2 yr fixed mortgage rates

BNZ hikes Total Money variable mortgage rate to 5.74% from 5.59%, but cuts 6 mth to 2 yr fixed mortgage rates

BNZ has raised its Total Money variable mortgage rate by 0.15% to 5.74% from 5.59%.

At the same time, it has cut its Classic one year fixed mortgage rate by 0.10% to 5.75% from 5.85% and its Classic 18 month rate by the same amount to 5.89%. It has left its 30 month Classic rate unchanged at 6.10%

It also cut  its Standard, Flybuys, and GlobalPlus fixed mortgage rates.

The six month fixed rate reduced by 0.05% to 5.75% from 5.80%. The one year fixed rate has been cut by 0.25% to 5.85% from 6.10%, and the two year fixed rate has been cut by 0.21% to 5.89% from 6.10%.

These changes remove the substantial rate advantage BNZ's Total Money variable had over other major banks offerings for floating rates, and positions the Total Money vaiable rate at a very similar level to its competitors.

Kiwibank's Offset Mortgage variable rate of 5.50% remains the lowest available from a bank, followed by Westpac's 5.60% Choices Everyday.

All up-to-date mortgage rates are here »

Back on October 28 Gareth Vaughan reported BNZ CEO Andrew Thorburn saying banks were likely to to hike floating mortgage rates even if the Reserve Bank left the Official Cash Rate at 2.5% because bank funding costs were likely to be driven higher by turmoil on international financial markets.

New Zealand's banks still obtain 14% of their funding from 'hot' offshore money markets. These markets are in turmoil in Europe because of the sovereign debt crisis.

But as Gareth reported back then:

Nonetheless banks hiking their floating rates against a backdrop of a 2.5% OCR would likely see them come under criticism.

In Australia a year ago the Ralph Norris led ASB parent Commonwealth Bank of Australia (CBA) came under sustained fire from politicians, the media and the public after lifting home loan rates by 45 basis points on the back of a 25 basis points hike to the cash rate by the Reserve Bank of Australia. And a year earlier Westpac, CBA and ANZ did the same with Australian Treasurer Wayne Swan saying they had no justification to do so.

The Reserve Bank is now expected to hold the OCR until the end of next year. BNZ and ASB extended their forecasts any OCR hike to the end of 2012 from mid-2012 earlier this week and NZIER said this morning it expected the RBNZ would hold until early 2013.

Also, Reserve Bank figures show New Zealand retail bank net interest margins have risen from 1.85% to 2.37% in the two years to October and rose from 2.31% to 2.37% between September and October.

BNZ's net interest margin increased by 14 basis points to 2.30% over the year to September, and by 11 basis points to 2.35% in the second half-year as customers switched to floating mortgages from fixed-term ones and loans were "repriced" to fit market conditions. Chief financial officer Ken Christie said in late October nearly all customers taking on home loans were currently choosing to float with 60% of the bank's home loans now on floating rates, which is slightly above the overall industry figure of 56%.

Banks tend to do better out of floating, or variable, mortgages because the margin between the variable rate and short end of the yield curve, such as three month bank bills, is higher than the margin between swap rates and fixed rate mortgages.

Back on November 7 Gareth Vaughan argued customers should haggle with their banks because bank profits were at record highs and net interest margins were rising, contrary to comments by banks that their funding costs were rising.

Back on November 6 Bernard Hickey argued New Zealand's banks were amazingly profitable and were increasing their net interest margins as customers moved to floating from fixed mortgages. He argued this gave them room to absorb any increase in funding costs through accepting lower profits.

Wholesale interest rates (see swaps chart below) are near record lows and have fallen 50 basis points in the last six months as fears about the European crisis hitting the global economy have dragged down expectations for economic growth and inflation.

(Updated with backgrounds, links, chart)

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

15 Comments

Time to fix? For how long?  First signal of rate rises on the basis of Euro-mess?

NZIER is doom and gloom - no rate rises til 2013 at earliest   http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=107…

 

Up
0

How come this is under "breaking news" as a "hike" in interest rates? 

The 5.59% rate was a simple "teaser" which is no different from when a supermarket 

sells toilet paper as a loss leader to entice customers  to buy more items.

The real story is that the bank cut interest rates and (as Olly Newland has oft predicted)  low interest rates are here to stay.

 

Up
0

FYI from above on whether fixed is more important than floating.

"Chief financial officer Ken Christie said in late October nearly all customers taking on home loans were currently choosing to float with 60% of the bank's home loans now on floating rates, which is slightly above the overall industry figure of 56%."

You're right that BNZ is moving its rate back to the pack from being in a leading position. But it's wrong to say it's just a loss leader when all new customers and 60% of your entire book are on it.

cheers

Bernard

Up
0

The public truly are the dumb money. The fix during a period where interest rates are likely to fall and float when they're likely to rise. And then they complain when banks impose high fees when they wish to break their contract and move onto a mortgage with a lower interest rates. People's stupidity truly astounds me.

Up
0

... rates are NOT likely to rise in the medium term, I can assure you...

Only an idiot would be on a fixed rate right now.

Up
0

'The only thing you get from a fix is certainty. Should you remain floating you will ensure that you pay the market over the long term'

Up
0

"Gareth Vaughan argued customers should haggle with their banks because bank profits were at record highs and net interest margins were rising"

Anyone out there had any success negotiating better loan rates? Any details appreciated.

Up
0

A mortgage broker can help a lot.

Up
0

Mortage Brokers help, as stated, to a certain degreee.

Apart from that, an offer letter from another Bank always used to make me pick up the phone and ring the pricing desk. Not just on rate but on terms and conditions (security required should there be multiple properties), fees and legal contribution.

Without a genuine second option on the table, the Bank's are trained at negotiation and I normally got my way...

Glad to be out of it!

Up
0

I don't see rates rising anytime soon. Fear drives things up and they are simply trying to scare you into fixing before rates come down further again. Hang in there if you are currently floating.

Up
0

Found a floating rate of 2.95% today. ................... But it's in Germany.

3%  - Canada. 
2.8%  - USA
4.5% - UK
3.7% France
6.91% - Australia
5.74% NZ

1.7%  Taiwan  - with a minimum 70% LVR! 

We must be such a high risk.   Those Euro countries are so .... safe. If I can buy a book on Amazon, how come I can't buy a loan offshore in this Global economy?

 

 

 

Up
0

Are you going to pay for the hedge to mitigate FX risk. Ask BNZ customers about it from the early 90's...

Up
0

This is just another example of profiteering - other banks will follow and expounce the same view. If you cut down to the "bare bones" of the banks argument it has nothing to do with mortgaes, ts about their bottom line profit, and unfortunately this is their biggest area of revenue gathering (as opposed to using the tword earning, as it isnt earnt)

In doing this the banks are in a precarious position as BIG BROTHER is watching them, and who knows what may happen? Regulating the industry - your views

 

cha cha

Up
0

Regarding the comment that you'd have to be "an idiot" to be on a fixed interest rate......it continues to astound me how many people out there are so sure they can predict the future.

We are about to draw down a mortgage on our first family home with (shock horror) a large proportion fixed for 2 years.  We are about to have our third child and will remain on one income for at least the next 12mnths.  During this time of reduced income we need financial stability.  We have left a proportion of the loan floating to allow us to make extra repayments as I return to the workforce.  And in response to a posted question, yes, we negotiated with our bank and received a 0.11% discount on the advertised rate.

Are we idiots for making financial decisions based on our own personal circumstances and the firm belief that we don't know what will happen with interest rates (and the economy more generally)?  If so perhaps more people need to be "idiots" instead of being blinded by the dual folies of greed and a belief in ones ability to predict the future.

 

 

Up
0
'The only thing you get from a fix is certainty. Should you remain floating you will ensure that you pay the market over the long term' 
Up
0