BNZ has cut most of its fixed mortgage rates this morning, bringing its rates into line with cuts by other banks in the last two weeks.
There has been slump of around 50-80 basis points in wholesale interest rates rates in the last six weeks (see our interactive swaps chart below) as fears about the European debt crisis hit expectations for growth and inflation globally.
Also, bank profit margins have risen around 40 basis points in the last two years because of a massive shift in customers from less profitable fixed mortgage rates to more profitable floating rates. Banks are now in a much more competitive mood thanks to these bolstered profit margins and a surfeit of cash on their now much stronger balance sheets. They are also trying to fire up profit growth through increased lending, given annual lending growth has slumped from 10-15% through the mid 2000s to 2% in 2012.
BNZ already had the lowest 18 month mortgage rate of 5.10%, but this morning it cut its 1 year rate by 50 basis points to 5.25% and cut its 2 year rate by 24 basis points to 5.65%. It cut its 3 year rate by 40 basis points to 5.75%, its 4 year rate by 40 basis points to 6.10% and its 5 year rate by 40 basis points to 6.50%. BNZ's 1 to 5 year rates are in line with the other major banks.
BNZ also slashed its 7 year fixed mortgage rate by 56 basis points to 6.99%. It is the only major bank offering a 7 year fixed mortgage rate. It left its 6 month mortgage rate unchanged at 5.75%.
Kiwibank kicked off the rate cutting frenzy on April 26 when it offered 4.99% for a 1 year mortgage rate to customers with 30% equity in their homes. See our original article here.
ANZ and its sister bank National then cut its one year rate to 5.25% on May 9 and its competitors have been cutting back and forth since then. See more here in Gareth Vaughan's article from May 17.
None of the banks have yet to cut their advertised floating mortgage rates yet from around 5.7%, although many are offering special deals of around 5.3% to customers with strong equity who ask or threaten to jump to another bank. See Bernard Hickey's call for floating rate borrowers to go to their bank or through a broker to renegotiate their floating rate.
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29 Comments
When will those demanding money for their time as in earned income revolt against this increasingly worhless relic.
It only has value for those who have it and can earn more by means of unearned income.
Those starting from scratch can never earn enough to save enough as the returns are loaded to the unearned income sector (bankers, rentiers etc)
This will only end badly as it has for an increasing minority already and that includes the dimwits @ JP Morgan Chase as well.
So where is the reduction in floating rates. They should be cheap as the banks can't get caught out.
I had a 'cup of tea' with the Westpac guy. Result was a reduction from 5.60 to 5.50. Exciting not. Which is what I told him. Of course I will take it -- but only in the interium..
Plan. A. Move to SBS where I have a facility already. So no changeover cost. B. Watch the rates closely. There will be movement shortly I believe. Then it will be another 'cup of tea'
Yep, the question of loyalty is on the minds of many of us. New customers are offered deals in sectors like telcoms. Essentially they wait until their existing clients ask. Banks doing simlar things.
People are not unsophisticated anymore. They know when they're being shafted (see above). That will become a large problem for banks when new business dries up.
Re floating and variable rates all you have to do is ask your bank and you will be offered at least 0.5% off and if you press them hard and threaten to change bank a floating rate reduction of 0.75% will most likely be offered.
Screw the banks - they screwed the customers when breaking fixed rates three years ago - now its your turn to fight back!
1yr 4.60%
2yr 4.75%
3yr 5.00%
4yr 5.25%
5yr 5.50%
Thats not my pick of lending rates but what in fact this bank is paying to depositors. If you can explain to me how they can pay depositors more than they can charge lenders and make money I will be very interested.
Also before you quote me off-shore borrowing make sure you include the margin over swap that they are paying as well.
Swap rate does not equal cost of funds.
Swap rates are but one source of funding for Banks and as per Core Liquidity Ratio requirements only forms a portion: there is a higher relience on Retail Deposits which are higher than those you have quoted.
Things aren't as simplist as you quote.
Check our Kiwibank One Year TD rate is 4.50% but One Year Fixed Lending rate is 4.99%.
While some funding is sourced at swap rate some will be funded via Retail Funds.
I suspect there is abit of a loss leader going on here at OUR Bank????
Why does Australia not have a version of kiwibank. As I see it a govt owned(and subsidised for good reason, I suggest) and run outfit that keeps the privately run banks honest?
Does the cost to us of subsidising Kiwibanks operation outweigh the benefits accrued by us in a competitive banking sector?
Courtesy of ex-PM & ex-finance minister Paul Keating , Australia has the " 4 Pillars " bank system ... which girds the loins of the ANZ / NAB / CBA / and Westpac ....
.... each of them is deemed " too big to fail " , and each is guaranteed to be free from being taken over .....
...... which helps to explain why Australia is happily milking NZ now , through 90+ % of the Kiwi mortgage market ....
Someone may enlighten us more fully , but my take on it was the four pillars concept was to prevent the biggest trading banks from attempting to cannibalise each other ( thereby reducing " competition " within the home mortgage market ) ....
..... so the big 4 gobbled up all their smaller rivals with glee .... and colluded on interest rates ..
Until that John Symond fellow set up " Aussie Home Loans " ..... the " Kim Dotcom " of the banking industry ...
1. Customers of Banks still want to deal face to face with bank staff with some transctions involving important or complex issues. Yes there has been a huge swing to using call centres and interent / txt and phone banking.
2. But Bank clients say they want to be treated as people by pepole, not as a number by a computer.
3. Banks have become hugely efficent. Don't see a lot branches with more than 20 staff nowdays: I recall branhces of 100 + with their own Lending, International, Administration areas.
4. Staff have moved from Flash branches to lower cost procssing centres out of CBD areas.
5. There are more bank staff on the road than ever has been: mobile lending managers, rural managers , buisiness managers , insurance managers, sales managers, EFT-POS specialists etc. 25 year ago there were no mobile bank staff: you had to go to an offfice.
6. Most banks offer fee fre accounts if you use online services. Same banks have tried pure online products / division (i.e. Bank Direct) but the first issue thay have they head back to a branch to talk to a real person.
7. UDC tried that with their sales force and it only lasted about 3 years.
I think you need to be more clear in your blogs as you make a blanket statement that no one should be paying more than 5%.
What s that for? Floating? Fixed and what term?
I think you are blind if you think banks will lend out at 5% for 5 years but offer 5.5% for deposits.
Be more clear in your comments and you will add something constructive to these discussions.
I asked my bank yesterday for the best floating rate they could do. They came back offering 5.25%. I said I had been offered 5.00% at another bank, plus they would cover the cost of moving. They responded immediately by matching the rate and updating my mortgage immediately. I logged into Internet banking to check and sure enough it was updated. Overall discount of 0.6% off the floating rate, and that discount applies for the next 2 years.
I imagine banks are factoring in the discounts they have committed to into their advertised floating rates.
You would be stupid to pay the advertised floating rate these days! Given how quickly they discounted their floating rate, I think I should probably have pressed them a little harder...
I was once told by a very good lawyer: If you don't have the answer then answer with a question to deflect it.
If you are saying that the floating rate should be circa 5.00% then you might have a point. (as I stated earlier ou comments are unclear as to what rate /term the 5.00% was relating to)
But if you are saying all rates should be 5.00% then my point of 5 years TD rates vs. 5 year lending rates is valid.
PS I don't need educating. Address the discussion not the person.
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