State-owned bank surprises mortgage market with an off-season market leading three year rate, as wholesale rates hit record lows

State-owned bank surprises mortgage market with an off-season market leading three year rate, as wholesale rates hit record lows

Kiwibank has cut its three year fixed mortgage rate today by -20 bps.

It new rate for this term is now 4.29%.

At that level, it is now the lowest three year rate in the market, knocking off ASB who have a 4.34% rate for three years.

No other Kiwibank mortgage rate changes were announced. (But they did tweak some term deposit rates at the same time.)

This new rate is the same as they offer for two years.

Kiwibank's hot new three year rate is the only market leading rate they have at present.

Wholesale swap rates are all at record low levels at present, opening the opportunity for banks to more finely price their fixed mortgage rates.

In fact, over the past 90 days, the wholesale swap rate has fallen from 2.31% to 2.06%, a -25 bps reduction.

Over the same period, the risk premiums have fallen as well. CDS spreads have fallen -20 bps as well.

Together, this has resulted in a -45 bps fall in bank wholesale money costs in 90 days.

But bank fixed mortgage rate carded offers have not responded in the same way. On average, bank three year fixed rates have fallen only -10 bps over the same period.

There is plenty of room for other banks to match Kiwibank.

However, one inhibition will be what banks are paying for term deposit funds from savers. These offers have fallen far less than wholesale funds. In fact, there has been very little change in the same 90 day period in what banks are offering for term deposits for terms 3 months through 24 months. On average, these terms deposit offers are 3.20% with some offering upwards of 3.35%

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

below 80% LVR 6 mths  1 yr  18mth  2 yrs   3 yrs   5 yrs 
  % % % % % %
4.99 4.25 4.89 4.35 4.99 5.30
ASB 4.75 4.25 4.25 4.29 4.34 4.79
4.99 4.25 4.99 4.19 4.49 5.15
Kiwibank 4.75 4.19   4.29 4.29 4.99
Westpac 5.15 4.25 4.95 4.29 4.49 4.89
             
4.50 4.25 4.25 4.29 4.49 4.99
HSBC 4.85 4.19 4.19 4.19 4.49 4.99
HSBC 4.50 4.25 4.15 4.15 4.65 4.99
4.75 4.25 4.35 4.19 4.59 4.99

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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Time to slash interest rates for floating mortgages then. Headline rate should be well under 5% already.

I'm sure if you have good enough 20% deposit you can negotiate most banks under 4%, you just have to let them know that you're shopping around to get better rates.

Will we see a cut of .25 or .5% next week?

If they are offering this it must be time to stay floating!

For now the OCR is only going to go lower or stay put. Never going up for a very long time, cause that is the game they wish to play like all the other RB's. So no matter what the banks offer now......just remind yourselves they will be offering even lower rates as far as the future is concerned. Savers? (any left?) sorry, you are continuing to be the scapegoat of all this mess and have my full sympathy.

Low interest rates have been with us since the GFC. That's almost 10 Years ago! Why would you have sympathy for someone who hasn't adjusted their portfolio accordingly? Stupid is as stupid does.

Umm, cause saving generally is not part of a portfolio, it's an essential incentive for banks to even exist and many people to live on after retirement.
I have sympathy for these people because I have empathy.

Kiwi bank would do better if they offer to beat any deal by 10- 25bps just like mitre10 if they really cared about kiwis.

Looking to place between $500k and $1.5m of residential funding. Anybody managing to get sub 4% and whats the going rate for cash / legals at the moment ? Cheers

Westpac will do 3.79% for 5 years under the right circumstances.