Banks continue to reduce fixed mortgage rates and the 1-5 rate difference is its flattest since 2009. But no other bank has followed HSBC below 4%

BNZ is the latest bank to tweak its home loan fixed rates lower.

This morning it cut its one year 'special' to 4.25%, a -14 bps reduction from 4.39%.

But this reduction does not place BNZ as the most competitive for this term. At this time, virually no BNZ mortgage rates are market-leading.

This change comes after a flurry of rate cuts to fixed rates. Banks have shown much more of a competitive impulse with their fixed rates than with the OCR-initiated floating rates.

That is probably because bank floating rates are the base for much small business lending which they perceive comes with more 'loyalty' and is less likely to flee when faced with an uncompetitive interest rate.

So now is a useful time to review where the home loan rate 'market' has settled to.

HSBC still retains the lowest rate in the market at 3.95% but no-one else has attempted to match this rate.

The spread between the lowest one year rate and the lowest five year rate is now only 84 bps, its flattest since March 2009. (Update: An earlier version of this table had an error for the two year rate. The market leading rate is offered by Kiwibank.)

Term	Lowest bank carded rate	Institution
	%
Floating	5.45
6 months	4.39
1 year	4.15
18 months	3.95
2 years	4.25
3 years	4.59
4 years	4.79
5 years	4.99	4 banks
7 years	5.55
10 years	5.75

Wholesale swap rates remain at record lows and have fallen more than banks have passed on in terms of interest rate reductions.

They claim that is because risk spreads have risen. But even these are retreating now. And what these risk spreads actually are is fairly opaque. Public bond sale filings suggest these spreads are nowhere near as large as those indicated by the CDS indexes.

As always, you should try to negotiate a rate lower than the carded rates. Many banks will entertain that to either retain or win your business. But your negotiating strength will very much depend on the quality of your financial position

Here is where fixed rates stand after today's BNZ reduction:

below 80% LVR	1 yr	18mth	2 yrs	3 yrs	4 yrs	5 yrs
	%	%	%	%	%	%
	4.25	4.89	4.35	4.99	5.20	5.30
	4.15	4.15	4.39	4.65	5.00	5.15
	4.25	4.99	4.39	4.64	4.99	5.15
	4.29		4.25	4.75	4.90	4.99
	4.25	4.95	4.39	4.80	5.09	5.19
	4.25	4.35	4.35	4.65	4.89	4.99
	4.25	3.95	4.39	4.59	4.79	4.99
	4.35	4.35	4.35	4.65		4.99
	4.35	4.35	4.29	4.79	5.35	5.35

In addition, BNZ has a fixed seven year rate of 5.55%, while TSB Bank offers a fixed ten year rate at 5.75%.