BNZ draws a rival to match its all-time low two year rate. Shift down exposes others to market share realignment

BNZ draws a rival to match its all-time low two year rate. Shift down exposes others to market share realignment

Westpac has matched BNZ this morning, adopting the record low two year 'special' mortgage rate of 4.69%.

On Monday, BNZ launched its new two year 'special' at the unusually low rate and the market has been waiting to see the responses by its rivals.

The Westpac move comes with similar conditions as BNZ.

Westpac has also cut its unique capped rates, dropping them to 6.15% from 6.40% for one and two year contacts.

But it is the two year 'special' rate where all the attention is now.

Most other banks are substantially exposed to this offer because it is lower than any other by about 20 bps and that is enough to garner substantial attention by borrowers and mortgage brokers.

Although major rivals like ANZ, ASB and Kiwibank are targeting their one year 'specials' these are still at 4.89%, substantially above the BNZ - and now Westpac - benchmark.

Even the challenger banks are on the back foot, rate-wise. Although it should be remembered that the main banks impose substantial conditions to get their latest offers, conditions like having to have credit cards and/or insurance or KiwiSaver products. The challenger banks generally do not require such add-ons and their rate offers may be much more competitive on a total-cost basis as a result.

Also, neither BNZ nor Westpac offer any sort of non-rate incentive for their 4.69% rate while their rivals do.

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

Almost all home loan competition is now back focused on the interest rate. Non-rate incentives have essentially dried up although there are still some worthwhile but targeted incentives available. You can see see the current non-rate home loan incentives here.

The new floating and fixed mortgage rates compare this morning as follows:

below 80% LVR Floating  1 yr  18mth  2 yrs   3 yrs   5 yrs 
    % % % % %
6.24 4.89 5.55 4.99 5.59 5.79
ASB 6.25 4.89 5.25 5.10 5.39 5.65
5.99 5.19   4.69 5.29 5.75
Kiwibank 6.15 4.89   4.99 5.39 5.60
Westpac 6.15 5.39 5.39 4.69 5.49 5.79
             
6.20 4.89 4.99 4.99 5.20 5.59
HSBC 6.35 4.89   4.89 5.29 5.60
6.14 4.99 4.85 4.99 4.99 5.59
6.24 5.45 5.59 4.99 5.40 5.85

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C'mon u greedy bankers - let's see a 4.49% 3 year rate. U have plenty of capability to offer that and cut your historically wide margins. Time for some of the billions of profits to be fed back to your customers!

Graeme Wheeler is suggesting that for the OCR to be cut further, we may have to face a recession. If that happens, the Banks will need to recapitalize their balance sheets to provision for a possible increase in Bad and Doubtful Loans. Then, (1) The Banks will withdraw some of their lending capacity, and concentrate on higher quality lending ( higher LVR's etc) and (2) they will increase the amount they charge on loans to either 'encourage' lower performing loans to 'go somewhere else' or ( more likely) increase their revenue by increasing mortgage rates, even as the OCR falls, ( as is happening right now in Aussie) to offset defaulting loans.
The immediate future is going to be fascinating to watch!

already happening in australia, they have increased what they charge investors against home owners and are requiring higher LVR's, wont take to long to cross the ditch

I'm just waiting for Westpac to bring down it's standard rates. Which it hasn't yet.
When it does I have some borrowing that I will put on 6mths fixed. Because it will be cheaper, and also because I might not need to borrow for any longer than that. What ever happens I will just keep cycling at 6th months. Lower cost and flexibility is the idea.

AMP Bank will stop writing new loans to property investors and is raising up interest rates for landlord borrowers by 0.47 per cent.

From The Aussie Financial Review this arvo....