By Gareth Vaughan
Once Reserve Bank Governor Graeme Wheeler confirmed he had pulled the trigger and increased the Official Cash Rate (OCR) for the first time in almost four years, the guessing game began. How would the banks respond?
As was widely expected, the Reserve Bank announced it was increasing the OCR by 25 basis points to 2.75% at 9am on Thursday March 13. It was the first OCR increase since July 2010, and the central bank also slightly raised its forecast for further interest rate hikes this year, assuming around 1.25% of OCR increases before the end of 2014 and a further 1% in 2015.
So which banks have been generous to savers and which banks have been kind to borrowers? Or, put another way, who has skimped on passing on the rate rise to savers, and who has been quick to dump it on borrowers? And how soon did they move?
The results below show a wide range of different strategies, but an overall impression that savers - especially via term deposits - haven't faired as well as they might.
A key feature is the broad moves by ANZ, the country's biggest bank, both on home loan rates and term deposit rates. These moves leave ANZ's carded, or advertised, rates on both sides of the ledger higher in most categories than those of its key rivals.
The first bank out of the blocks, before lunch on the 13th, was ANZ.
ANZ said it was increasing its floating mortgage rate by 25 basis points to 5.99%, and its revolving credit 'Flexible" rate by 25 basis points to 6.10%. These changes were effective from 17 March for new borrowers, and from April 1 for existing lending.
ANZ is also increasing the interest rate on its Serious Saver account from April 1 by 25 basis points to 4%.
On the evening of March 13 ASB said its Housing Variable, Orbit Home Loan and Orbit FastTrack Home Loan floating mortgage rates were going up 25 basis points to 6.00%. And the bank's HomePlus reverse equity mortgage rate increased 25 basis points to 7.50%. These changes were effective from March 21 for existing home loans and from March 14 for new home loans.
ASB also increased its one year fixed mortgage rate by 20 basis points to 5.69%, and withdrew its 18 month and two year special rates from March 14.
Kiwibank said it was increasing variable and revolving credit home loan rates by 25 basis points to 5.90%, with its offset mortgage rate increasing 35 basis points to 5.60%. The increases took effect from March 17 for new customers and from March 31 for existing customers.
Kiwibank also increased term deposit rates for terms from 30 days through to 150 days (five months) by 25 basis points.
The Co-operative Bank announced a range of home loan rate increases. Its floating and revolving rates were hiked 25 basis points to 5.95%, its one year rate was increased 10 basis points to 5.49%, two year 14 basis points to 5.99%, and three year 10 basis points to 6.35%. The changes kicked in for new borrowers from March 17, and for existing borrowers will do so from April 1.
TSB Bank said it was increasing its floating mortgage rate 25 basis points to 6.04%. It also put its 18 month and 24 month term deposit rates up, five basis points and 25 basis points to 4.15%, and 4.55%, respectively.
SBS Bank said it was increasing its floating rate home loan rate by 25 basis points to 5.90%. A similar change was made to its Transactional Flexi revolving credit rate.
SBS' fixed mortgage rates were also increased with its six month rate up 10 basis points to 5.30%, one year up 15 basis points to 5.50%, two and three year rates up 10 basis points each to 5.90% and 6.20% respectively, and five year rate up 15 basis points to 6.85%.
True to CEO Andrew Thorburn's word, BNZ waited a few days before moving. The bank then lifted its flagship TotalMoney floating mortgage rate by 25 basis points to 5.99%. It also increased its standard floating rate, but by 20 basis points, to 6.19%
BNZ also increased its revolving credit rates, with the Rapid Repay account up 20 basis points to 6.19%, and Mortgage One up 20 basis points to 6.60%.
It also upped its six month and one year fixed rates by 24 basis points and 20 basis points, respectively, to 5.49% and 5.69%. And interestingly BNZ trimmed its three year fixed mortgage rate by six basis points to 6.29%.
BNZ also raised two term deposit rates, with its nine month rate up 20 basis points to 4%, and its 12 month rate up 10 basis points to 4.10%.
HSBC cut its two-year fixed home loan "Premier" interest rate by 50 basis points to 5.79%. HSBC's also hiked its floating and revolving rates by 25 basis points, effective April 1, to 6.24%. The bank has also increased its six month and one year home loan rates by 14 and 24 basis points, respectively, to 5.39% and 5.59%.
Back for another crack ANZ raised a range of fixed term home loan rates. Its one year rate was pushed up 16 basis points to 5.85%, the 18 month rate was hiked 14 basis points to 5.99%, the two year fixed rate was lifted 20 basis points to 6.49%, and three, four and five year rates were increased 20 basis points to 6.85%, 7.19% and 7.40%.
This time around ANZ also raised term deposit rates for all terms from one month to five years other than its six, nine and 12 month ones. The one month rate was increased 20 basis points, and all others increased went up 25 basis points.
The last major bank to move, Westpac increased its Choices Floating mortgage rate - for borrowers with a deposit or equity of at least 20% - by just 10 basis points to 5.74%. All the bank's other floating home loan rates were increased by 25 basis points.
On the savings side, term deposit rates for terms up to 90 days were increased by 25 basis points, and interest rates on Westpac's Online Bonus Saver and Online Saver savings accounts increased by 20 basis points.
ASB announced increases to interest rates on a range of savings accounts, of between 15 basis points and 25 basis points. After the increases, the highest rate on offer is 3.45%. (These changes had been noted on the bank's website on March 14).
Heartland Bank upped 18 month and 24 month term deposit rates. The 18 month rate was lifted 15 basis points to 4.40%, and the 24 month rate 25 basis points to 4.65%.
RaboDirect increased its nine month and 18 month term deposit rates by 10 basis points and 20 basis points to 4% and 4.50%, respectively.
Kiwibank increased its six month term deposit rate by 35 basis points to 4% for those with between $5,000 and $9,999 on deposit, and by 35 basis points to 4.10% for those with $10,000 or more on deposit. The state owned bank is also lifting its six month fixed-term home loan rate by 15 basis points to 5.55%, and its one year fixed home loan rate is being lifted 20 basis points to 5.69%.
For the best advertised home loan and term deposit rates currently advertised, see the tables at the bottom of this story.
And for full comparisons between interest rates offered, or charged, by different financial institutions, follow the links below to our comparison pages.
The key dates & what about those LVR restrictions?
With the expectation of further OCR increases to come, below are the dates of upcoming OCR reviews. Note the one on September 11, just nine days before the election. It's fair to assume Wheeler would prefer to hold tight that day.
Another issue to keep in mind is the restrictions on banks' high loan-to-value ratio (LVR) residential mortgage lending. This means banks must restrict lending at LVRs above 80% (where borrowers don't have a deposit or equity of at least 20%) to no more than 10% of total new mortgage lending. The Reserve Bank will measure banks on this, at an average rate over a six month period, for the first time at the end of the month.
The question then arises; How long will the Reserve Bank keep the high LVR restrictions in place?
With the OCR rising and swap rates also heading higher (see chart at the foot of this story), it's likely there are plenty more mortgage and deposit rate rises to come this year.
Upcoming OCR reviews and Monetary Policy Statements (MPS)
24 Apr 2014 OCR
12 Jun 2014 OCR and MPS
24 Jul 2014 OCR
11 Sep 2014 OCR and MPS
30 Oct 2014 OCR
11 Dec 2014 OCR and MPS
29 Jan 2015 OCR
12 Mar 2015 OCR and MPS
30 Apr 2015 OCR
11 Jun 2015 OCR and MPS
Here are today's 'best rate' tables
|Banks only, $10,000 deposit||Highest rate|
|90 days||4.00%||Kiwibank (Notice Saver)|
|1 year||4.25%||Co-op and Heartland|
*Note many of the home loan rates and term deposit rates featured in this article will have conditions attached. For mortgages these may include the likes of requiring at least a 20% deposit, and for deposits a minimum amount of money being deposited.
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