Kiwibank offers its lowest rate ever, with two-year 3.99% mortgage special offer

Kiwibank offers its lowest rate ever, with two-year 3.99% mortgage special offer

By David Hargreaves and David Chaston

Kiwibank has launched a two-year fixed rate home loan rate of 3.99%.

This is the lowest fixed rate the bank has promoted since it was launched in 2002.

It is also possibly the lowest-ever rate offered by one of the 'big banks' in this country - though HSBC does have a 3.95% existing offer, which is about to end.

For the new Kiwibank mortgage, a minimum 20% deposit is required and the special rate will only be available for two weeks (ending May 27, 2016).

Kiwibank said the 3.99% rate "significantly undercuts" carded rates by competitor banks.

The action by Kiwibank comes amid a flurry of rate cutting.

Earlier today Westpac joined two other banks offering a 4.19% two year 'special' mortgage rate.

That involved a -20 bps cut in their previous 'special' for that term.

At the same time they have ended their 4.80% three year 'special', reverting to the standard 4.99% rate.

The new Westpac two year 'special' lines them up with TSB Bank who adopted the rate first, and ASB, who dropped to the same rate last week.

For the 2 year term, these three banks now have a +16 bps advantage over ANZ at carded rates, who have the largest mortgage book in New Zealand. 4.35% is ANZ's lowest carded rate of any term they offer.

Prior to Kiwibank's announcement, the lowest current carded rate offered by any bank for any term was by SBS Bank who are offering 4.10% for a fixed one year term. HSBC have announced the end of their 3.95% 18 month rate and borrowers will need to make their deal with them by May 20, and draw down by the end of the month if they wish to capture that rate.

Behind the scenes, wholesale swap rates remain near record lows. Most of the declines in this wholesale funding has not yet been passed on in mortgage rate offers (or taken from term deposit offers) - yet.

Banks are somewhat constrained by their core funding ratio obligations. They also claim that swap spreads 'are high', adding to their wholesale costs. 

Here is where fixed rates stand after today's changes:

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
ASB 4.25 4.25 4.19 4.65 5.00 5.15
4.25 4.99 4.39 4.64 4.99 5.15
Kiwibank 4.29   3.99 4.75 4.90 4.99
Westpac 4.25 4.95 4.19 4.99 5.09 5.19
             
4.25 4.35 4.35 4.65 4.89 4.99
HSBC 4.25 3.95 4.39 4.59 4.79 4.99
HSBC 4.10 4.35 4.29 4.65   4.99
4.35 4.35 4.19 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%.

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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29 Comments

So the new owners see the kitchen ATM as a precursor to debt financed consumption driven growth?

Nippon Life President Yoshinobu Tsutsui Says Negative Interest Rates Hurting Company

http://www.wsj.com/articles/nippon-life-president-yoshinobu-tsutsui-says...

Wow , where is the bottom of this rate cycle ?

Minus 2% and QE5?

look around the world - its sub 1%. NZ will be no different

Low interest rates plague Bank of America, Wells Fargo earnings

http://www.housingwire.com/articles/36796-low-interest-rates-plague-bank...

Lloyds Banking Group Plc is considering deeper cuts, beyond its target to eliminate 9,000 jobs by the end of next year, according to two people with knowledge of the matter.

http://www.bloomberg.com/news/articles/2016-04-22/lloyds-said-to-mull-de...

Who cares? Llyods is a part of that financial cesspool called London. The sooner it disappears the better.

TY for the links, Will be interesting to watch the ZIRP play out, not sure we have played this game before, Who will suffer the eventual and inevitable consequences?... initially it looks like the money brokers.. but im guessing in the end it will be the people.

Good show Kiwibank! What ya doing BNZ?

.

Its hard to see how they justify a floating rate 2.5 % higher.

And to think there's 7% yielding property still in growing decent sized cities like p.n. there's only so much I can buy. Easy way to replace salary that's for sure

I read Tony Alexander's weekly summary today. It felt as if it was written by the marketing team at BNZ. Anyone reading it needs to with a pinch of salt.

He mentioned that the loan to income ratio's wouldn't work as it would "disproportionately hit first home buyers"

Yet he forgot to mention the elephant in the room that these rules could be applied to INVESTORS ONLY.
Investors make up over 40% of the buyers in a market were demand is already sky high so anything used to reduce the ability of investors to pay sky high prices,such as loan to income ratio's) has to be a good thing.

The problem in NZ is you have all these Tony Alexander types being referred to yet the public forget that they work for the big banks that don't want this circus stopping. Banks are making money hand over fist and with debt increasing 8% p.a. and up to 216BN dollars its a little wonder they don't wont this to discontinue in the future.

Loan to Income Ratio's on Investors and Stamp Duty. Make our houses our homes again. #stampduty26

I have four small mortgages and Westpac offered 4.45 fixed for six months. I declined as it ties me to them. I also have good capacity to reduce the balances. So today we settled on 5.25 floating for everything.

I'm floating several mortgages with Sovereign at 4.75%. This was negotiated last month.

4.75%. !! *#*# That's really good for floating. Maybe I am a poor negotiator. Also I'm not that attractive to Westpac as the balances are not large and I am reducing those very rapidly as well.

Im getting 4.75% at Westpac. When they failed to pass on all of the OCR cut I told them I wanted an additional .10% discount to make up for it. They ummed and ahhed then caved...helps make up for the rubbish service I guess.

Has anyone noticed that TSB are not discounting much off their carded rates at the moment ?

Kermit the trick is to be floating ask kiwi bank what they can offer to help move your debt there, have that emailed to your e-mail forward that to your bank and I'm sure you'll be able to negotiate something better...fixed Westpac unfortunately don't need to help you, as you are trapped...

Cheers CIO. Kiwibank put together a very good offer to us yesterday so all our TSB business is going to them. TSB were so far off the pace this time around its not funny.
Westpac generally give us good pricing but their service over the past 12 months has got steadily worse, so they might well be for the high jump as well.
Weve been rolling most of our loans over for 6mths for the last 18 months, has served us well thus far.

well done...

Always they want you to be fixed. You have to stay on message and say 'floating floating', and 'what's the offer'. Fixed is a huge advantage to them, because you then can't bargain.

double post !

I have a cousin that used to work with Tony A when he was a marketing rep at Big Save Furniture

How long until we see 2.99% fixed mortgage for 2 years?

18 months. It will happen like this. Govt introduces market tightening measures in response the RBNZ cuts rates.

1) LTV ratios, = RBNZ Rate cut.
2) Higher deposits for BTL investors = RBNZ Rate cut.
3) New Taxes for investors = RBNZ Rate cut.

Maybe in that order, maybe not.

Yep sounds about right.

Yes folks, the demand is so amazing and the economy so booming that these rates must just keep being lowered......cause........it's NOT amazing or booming. It's heading down the road to nowhere like every other OECD nation with excessive private and government debt.

When we get to 1% say, what will be the spin I wonder? "The economy has gone stratospheric?

I would suggest you check the source - if you go onto the Kiwibank website the 3.99% is the one year rate not two...