Fixed home loan rates continue to fall quickly, leaving some institutions behind. Latest market leading rates lowest in 60 years

Fixed home loan rates continue to fall quickly, leaving some institutions behind. Latest market leading rates lowest in 60 years

Sharply lower funding costs have seen a new bank release a new record low fixed mortgage rate offer.

HSBC has launched an aggressive new home loan rate offer as follows:

Term Special rate
% p.a.
New rate
% p.a.
Old rate
% p.a.
6 month fixed   5.39 5.65
1 year fixed 4.49 4.89 4.89
2 year fixed 4.49 4.89 4.89
3 year fixed 4.49 4.99 5.29
4 year fixed   5.09 5.50
5 year fixed   5.29 5.60

It is effective immediately.

Interestingly, these rates are lower than HSBC offers for one to three years fixed in Australia where a 4.79% rate applies. (Westpac NZ's two year 'special' of 4.69% is also lower than Westpac Australia's equivalent fixed rate.)

While it is stated as "for a limited time" the New Zealand 'specials' are expected to stand in the market for quite some time.

These special home loan rates are being offered to new and existing HSBC Premier customers.  To qualify, customers must have at least 20% deposit or equity – 30% in the case of new residential investment lending on Auckland housing - and have their salary credited to a HSBC transaction account.

The new low Standard rates are available to Premier customers without the LVR restrictions.

Premier customers qualify if they have either a minimum combined home loan of $500,000, or $100,000 in savings and investments with HSBC.

These days in Auckland, the home loan minimum benchmark will cover many more situations than even a year ago.

The 4.49% rate is certainly the lowest home loan level since 1964 when the earliest RBNZ data is available. However it is likely to also be the lowest since the post-World War II State Advances Corporation offered low interest loans to returning servicemen at 3% through 1955. (3% loans continued to be available to qualifying low-income borrowers through 1958.)

BNZ and Westpac lowered fixed rates earlier this week, leaving ANZ, ASB and Kiwibank exposed to a -20 to -40 bps rate disadvantage. That disadvantage has now pushed out to -40 to -60 bps, and at these levels customers will be taking serious note. Discrepancies at these levels move market share.

Wholesale rates are also falling. The HSBC 'specials' suggest that are accpeting a gross margin of about 1.5%. The other main banks appear to be operating at 1.75% to 2% for their 'specials', more like 2.25% for other rates.

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 today 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 4.49   4.49 4.49 5.29
6.14 4.99 4.85 4.99 4.99 5.59
6.24 5.45 5.59 4.79 5.40 5.85

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Is there a liquidity issue that dictates residential property investors increasingly need lower rates to sustain payment participation? Surely bank margins are about to become an issue of significance when it comes to securing head office return on capital diktats, or am I missing something besides depositors subsidising Auckland and national farming property bubbles?

If the internal transfer pricing mechanisms work properly ( the cost of funds that each banks' Divisions must pay their Group Treasury to access funds less their share of fixed costs) there can't be much, if anything, in it for the Lending Divisions to take the funds and then generate a profit with rates down here? It must surely be a grab for market share, hoping to maximize income from related products. But what, exactly!

If you are talking straight swap + liquidity most banks are sitting at outright cost around 3.50ish in the 1-3yr space. So assuming HSBC dont have to pay much in the way of channel costs (broker/cash back etc) then theres about 1%. But yes, considering those things still seem to be happening then there isnt too much in these rates at all if you take out 0.7% brokerage fee or the common 0.5% cash back offers.

Rates will be going lower - see the business confidence results out today.

we could come very very close to 60 cents in the near future,
it will only need another bad milk auction for it to break next downward resistance

Early 5th Aug - current prices show >15% down for WMP

Weren't State Advances loans available at those low rates right through the sixties? My parents got one for a new build in 1969 and I am fairly sure the interest rate was down around 3% (I had a look at the mortgage documents recently, it was about a $9,000 loan which was about the build cost, the section was $1570).

People who recall the era could confirm.

I don't think nesw borrowers could get the 3% rate after about the mid 1950's. Rates went to the high 4%'s soon after the 3% lid was lifted. Just my recollection. But readers might have the exact detail. A link would be useful.

We bought our first home in 1979/80 and we got a low interest loan (something like 3%) from the Post Office Savings Bank - only for part of the mortgage. The largest chunk was a BNZ loan (can't recall the interest rate) and then we had a couple of grand (I believe) from a lawyer administered trust (that was the painfully high interest rate). Were able to get rid of that high interest rate component within a year (refinanced via the bank).

3.99% fixed for 3 years should be available soon