Despite record low wholesale rates, BNZ announces increases in two of its key fixed mortgage rates, moving up to levels adopted by its main rivals

Despite record low wholesale rates, BNZ announces increases in two of its key fixed mortgage rates, moving up to levels adopted by its main rivals

4.29% now seems to be the favoured pitch point among bank pricing departments.

Today, BNZ raised two fixed rate 'specials' to that rate.

Yesterday, Kiwibank cut its three year offer to that rate.

(In fact, only ANZ among the majors doesn't offer a 4.29% rate.)

BNZ's changes today involve raising their 1 year fixed rate by +5 bps from 4.24% to 4.29%.

At that level, it is the highest rate for this term from any institution.

BNZ's 2 year rate has been raised by +10 bps from 4.19% to 4.29%.

That aligns it with all their other main-bank rivals except ANZ who have a carded rate of 4.35%.

No other BNZ mortgage rates have been changed at this time.

The bank with the lowest one year rate offer remains Kiwibank at 4.19, joined at that rate by HSBC.

The bank with the lowest two year rate offer remains SBS Bank at 4.19%.

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 BNZ is not responding to the drop in wholesale funding costs, choosing rather to align its rates with its rivals. And so long as the bank with the largest volume (ANZ) does not shift lower, the rest will be happy to sit just under its rate levels.

Banks now seem to be competing for margin, having realised that most borrowers have few options, and the practical market share risks are low.

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 4.29 4.99 4.29 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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Don't worry. They will be bringing it down soon. Very soon.

David, I am not sure you call out all the moving parts in retail lending rates.... mixed messages on the site :
Retail, locally sourced funding, which moves differently to swap rates, is a large component of what drives a retail lend rate. Banks are bound by all sorts of prudential measures such as Core Funding that mean off shore borrowing costs don't bear a 1-1 relationship with retail lending prices.

The banks are being prudent and protecting their balance sheet. Some might not like it but is better in the medium term as it helps protect on the downside.

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