TSB has turned up the heat in a battle between banks for mortgage market share.
TSB has announced it has cut its 2 year mortgage rate to 5.3% from 5.5%, making its rate the lowest on offer by banks in New Zealand. TSB later said the offer was a 'special' and that its regular rate remained at 5.5%.
Most other advertised 2 year mortgage rates are around 5.5% to 5.6%.
TSB is already offering 5.2% for its 1 year mortgage rate, which is also the lowest rate on offer. Most other banks are stuck around 5.25%.
Meanwhile, on Thursday SBS Bank cut its six-month fixed-term rate by six basis points to 5.59% and its two-year fixed-term rate by six basis points to 5.49%. The lowest advertised six-month rate is 5.25% from both ASB and Kiwibank.
TSB's move came after Kiwibank allowed its 1 year 'special' rate of 4.99% to lapse late last week. Kiwibank's special offer fired up a fresh bout of competition in the banking market, fuelled by a fall in wholesale mortgage rates and an increase in bank net interest or profit margins. Kiwibank gathered over NZ$200 million in extra business from the special.
See all bank mortgage rates here.
Wholesale 'swap' interest rates, which are the basis for fixed mortgage rates, have fallen 50-80 basis points in the last six weeks as concerns about the global economy and New Zealand's own economic outlook have mounted.
Financial markets are betting the Reserve Bank of New Zealand will cut its Official Cash Rate by around 45 basis points over the next year to around 2%. The OCR is the basis for floating mortgage rates, which are advertised around 5.7%, although many customers with high levels of equity and good credit records pay floating rates of around 5.2% to 5.3% in competitive situations.
However, bank economists are still forecasting the Reserve Bank will hold the OCR until March next year and will then increase the rate to around 4.0-4.5% over the next two years.
The 5 year swap rate, however, is around 2.95%, suggesting many financial market players see the OCR below 3% in five years time.
See our fixed vs floating calculator here.
See Bernard Hickey's Fixed vs Floating guide here.
(Updated with TSB saying the rate was a 'special' rate, & with SBS Bank's cuts).
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12 Comments
Little thing called the carry trade - you might have heard of it. When the NZD dropped 50% against the USD and Yen in 2008 it wasn't because the NZ was a safe haven. Nor did the RB pump billions into kiwi banks including purchasing mortgage securities because they were a safe haven able to weather any storm. Without the RB to help them out they were stuffed - couldn't borrow overseas at any price. I also had a mortgage with a floating rate about 11% by the time the Asian Financial Crisis finished in 1998.
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