(Updated with a correction to Westpac's terms, plus TSB has also adopted the 6.25% three year rate benchmark.)
This morning, Westpac has become the third bank to drop its three year fixed mortgage rate to 6.25%, matching ASB and BNZ.
But unlike the BNZ offer, the Westpac one does come with special conditions.
It requires a minimum of 20% of the total home loan amount must be on either Choices Everyday, Choices Floating or Choices Offset.
A minimum of 20% equity is required, and your salary needs to be credit to a Westpac transaction account plus one other specified Westpac product is required. This can be a savings or term deposit account, a credit card, a personal loan, or a managed fund (like KiwiSaver, so long has it has a balance of $2,000 or more).
Westpac already has a four year special at 6.59% with similar conditions.
At the same time, it is launching a special cash contribution of $1,500 for loans over $100,000, rising to a $2,000 sweetener for loans over $250,000. There are new conditions for these bash-back offers.
Also this morning, TSB has adopted the 6.25% for a fixed three year mortgage. This is enhanced because there are no conditions required to access this rate. On that basis, the TSB offer is similar to the BNZ one.
What is allowing banks to drive these 3 and 4 year rates lower are the soft yields for international bonds. These are keeping NZ swap rates soft.
Today, swap rates for terms 2 years and longer are opening 3 to 5 bps lower.
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% |
 |
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% | |
 |
5.85% | 5.99% | 6.19% | 6.25% | 7.40% |
| Co-op Bank | 5.85% | 5.85% | 5.99% | 6.35% | 6.99% |
 |
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% | 6.25% | 7.40% |
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Mortgage choices involve making a significant financial decision so it often pays to get professional advice. A Roost mortgage broker can be contacted by following this link »
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