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BNZ matches ASB with a hot 3 year fixed home loan rate, but without conditions

BNZ matches ASB with a hot 3 year fixed home loan rate, but without conditions

This morning, BNZ has dropped its three year fixed mortgage rate to 6.25%, matching ASB.

But unlike the ASB offer, this latest BNZ one is not a 'special' and does not require an 80% or lower LVR.

The BNZ rate applies to their Standard, FlyBuys, and GlobalPlus product offerings.

This 6.25% rate is setting a new standard in the latest round of mortgage skirmishes.

The three year rate now comes with only a 30 or 40 bps premium over a one year fixed rate, a level low enough to be attractive for many borrowers wanting long-term payment stability during a period when the RBNZ may be sharply increasing its OCR.

What is allowing banks to offer these lower 3 year rates are the soft yields for international bonds. These are keeping NZ swap rates soft.

These lower rates are allowing banks to use 'price' as their main promotion tool as they fight for a market that has been growing only modestly and may be entering an even slower phase.

The rush to fix also poses a problem for the RBNZ, potentially making their OCR tool less potent in the future. Currently, 70% of all banks' mortgage books are due to reset within one year, but that is down from its peak of 85% in January 2012, and it is a stat that fell sharply - down almost 3% - in March 2014. It is a metric that got down as low as 37.2% in June 2007, completely undermining the effectiveness of OCR rate signals.

The push by banks to be competitive in the three year term is historically unusual, and if significant numbers of customers respond, it could have long lasting impacts on the OCR potency.

See all banks' carded, or advertised, home loan rates here.   

The latest fixed rates compare as follows:

below 80% LVR 1 yr 18 mths 2 yrs 3 yrs 5 yrs
5.85% 5.99% 5.95% 6.85% 7.40%
ASB 5.95% 5.99% 6.19% 6.25% 7.40%
5.85% 5.99% 5.95% 6.25% 7.40%
Kiwibank 5.85%   6.19% 6.29% 7.20%
Westpac 5.85% 5.99% 6.19% 6.85% 7.40%
Co-op Bank 5.85% 5.85% 5.99% 6.35% 6.99%
HSBC 5.59%   5.79% 6.55% 6.99%
5.60% 5.85% 5.99% 6.35% 6.99%
TSB 5.70% 5.85% 5.99% 6.60% 7.40%


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I just checked the BNZ website and it says that a low equity premium applies to all lending over 80%.

Just locked away my last floating on this 3 year rate. (planning on buying later this year so can balance things with a floating portion on that purchase).
I did the math on a 5 year perid (taking previous 2 years floating at 5.25%), and taking up this 3 year option (plus floating for previous 2) would have been equivalent to a 5 year fixed at 5.85% in may 2012 (5 year fixed was over 6% in may 2012).
I think it's a very good rate.  I locked away a lot at end of 2012 at 5.95% so my floating since then together with this fixed for 3 year rate now is likely to match or better that 5 year fixed (depends how high rates are between may 2017 and end of 2017 where my 3 year comes off but my 5 year is still locked at 5.95%. 

Days to the General Election: 20
See Party Policies here. Party Lists here.