[CORRECTION: An earlier version of this story failed to identify that TSB has the lowest 2 year fixed home loan rate of 5.80%.]
ASB has cut some home loan fixed rates.
They have reduced their standard one year fixed rate by 10 bps to 5.85% from 5.95%.
And they have added a 'new' two year Special at 5.89%, with conditions.
Their standard two year rate is 6.19%, so the special involves a reduction 30 bps.
It applies to new and existing lending for customers who have at least 20% equity (i.e. a Loan to Valuation Ratio of less than or equal to 80%), an ASB credit card and have salary or wages credited to their main transaction account with ASB.
The new two year special rate is in addition to their other existing three year fixed special of 6.25%.
“These new rates provide customers with ... greater rate certainty over the medium term as we approach the Reserve Bank’s review of the Official Cash Rate on 12 June,” said Shaun Drylie, ASB General Manager of Product and Strategy.
The combination of soft wholesale rates and a sluggish mortgage market may see a more intense period of bank competition leading up to the next expected RBNZ rate hike.
Earlier in the afternoon, Kiwibank beat ASB to the punch, launching a 5.85% two year special. If that hadn't happened, ASB would have had the lowest rate for that term. But now they don't. TSB have the lowest 2 year rate of 5.80%.
BankDirect made the same rate move as ASB. Sovereign followed with the one year reduction and has now but has not adopted the two year Special also at the same 5.89%.
See all banks' carded, or advertised, home loan rates here.
This is how these new ASB rates compare:
| below 80% LVR | 1 yr | 18 mths | 2 yrs | 3 yrs | 5 yrs |
 |
5.95% | 6.19% | 5.99% | 6.55% | 7.40% |
 |
5.95% | 5.99% | 5.89% | 6.25% | 7.40% |
 |
5.85% | 5.99% | 5.95% | 6.25% | 7.40% |
| Kiwibank | 5.85% | 5.85%* | 6.29% | 7.20% | |
 |
5.95% | 6.14% | 6.19% | 6.25% | 7.40% |
| Co-op Bank | 5.85% | 5.85% | 5.99% | 6.25% | 6.99% |
 |
5.59% | 5.99% | 5.99% | 6.99% | |
 |
5.60% | 5.85% | 5.99% | 6.25% | 6.79% |
| TSB | 5.70% | 5.85% | 5.80% | 6.25% | 7.40% |
* only as part of their 60/40 'special' deal. Otherwise 6.19%.
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11 Comments
Banks need to lend more money.
Banks are not lending as much.
Borrowing volumes are down and flattening.
The price of money is far too high given general & global conditions.
Therefore interest rates will be cut, so the price of money is lower, to attract more borrowers.
It's taken 3 years for the RBNZ to remove the emergency OCR put in place. It's about time they did some "proper" increases. I suppose a learning from the Christchurch Earthquake response would be to put LVR restrictions in the same time they do a emergency OCR cut - stopping households gorging on cheap debt (and luring themselves to leverage to the hilt e.g. Auckland would be a prime example). The RBNZ should probably link the LVR restrictions to an OCR of say 4.5% (neutral interest rate?) .
Without the chch earthquake the nz economy would have ground to a halt due to the RBNZ having started it's tightening cycle far too early.
Shame that it took a national tragedy in order to rescue the NZ economy from being suppressed by our 'globally misaligned' monetary policy.
I'm not entirely convinced an OCR of 3% was the reason why the NZ economy was in the doldrums. I think events due to factors overseas (leading to falls in exports) and the banks restricting the extending of credit to businesses (and households) would have been stronger factors.
As for a globally misaligned monetary policy, one only has to look at the EU to see how applying a one size fits all type of monetary policy over different countries has on investment decisions an economic outcomes. It is easy to see how you can get a misallocation of resources leading to asset bubbles. Every economy has it's own quirks and should probably have its own way of managing monetary policy.
Maybe it is best to let the economic historians argue over whose Monetary Policy was right.
Back to the rates war that is unfolding - I say about time - that Net Interest margin was getting fat. And spottie is right, the uncarded rates that seem to be on offer would probably mean the R BNZ could sneak in another OCR rise.
For anyone about to come off a fixed rate, you will notice the banks are very very keen to get you back on a fixed rate through a massive direct CRM marketing campaign.
They do not want you floating currently, as there is likely to be some good pencil sharpening on rates this year as competition heats up.
All the banks have their profit targets - no doubt the Australian parents have linked the release of staff bonuses to the bank making record profits. They've cut their costs, provisions for bad loans are probably at their bottom. The normal way then to meet those profit targets is to push more debt onto households but damn! those pesky LVR rules mean we can't do that so easily. All that is left to do is to steal customers from other banks to be able to get the required revenues. Those CRM campaigns are probably there to stop existing customers running off - notice all those cash "give aways" being advertised?
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