The withdrawal of the 3.79% two year mortgage 'special' reflects rising pressure on banks wholesale and retail funding sources as money costs turn up from their historic low levels

The withdrawal of the 3.79% two year mortgage 'special' reflects rising pressure on banks wholesale and retail funding sources as money costs turn up from their historic low levels

HSBC has now ended its 3.79% two year Premier special mortgage offer.

They launched it on August 17, 2016, promoting it as "the lowest-ever New Zealand home loan rate".

At that time, it was a -40 bps reduction from 4.19%.

Today (Thursday), it has reverted back to 4.19%.

Now, the lowest home loan rates are now offered by SBS Bank who offer 4.15% for the 18 month and two year term as a 'special' rate.

In addition, the local branch of the China Construction Bank has raised mortgage rates today by between +15 to +25 bps for all fixed terms of 6 months to 3 years. Their new 2 year fixed rate is now 5.10%.

Rising rates during the traditional spring house selling season is somewhat unusual, and most other banks seem to be holding the line at this time.

But upward pressure in wholesale money markets will not be helping banks and their pencils may be blunter than usual with below-card discounts.

On August 19, 2016, the two year swap rate was 1.94%, its all-time low. Today that same wholesale rate is 2.14%.

Equally pressuring banks are the rates they are paying term deposit savers. From August 17, six month TD rates have held at an average of about 3.25%, while twelve month bank average TD rates are stable at about 3.20%. Both are in the region of all-time lows, although some institutions offer 'specials' of up to 3.60% at various terms. Term Deposit rates at this level do not really support mortgage rate offers under 4%. Banks are limited in their 'core funding' obligations to keep a certain exposure to local funding sources, including household and business term deposits.

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

A snapshot from the key retail banks is:

below 80% LVR 6 mths  1 yr  18 mth  2 yrs   3 yrs   5 yrs 
  % % % % % %
4.99 4.25 4.89 4.29 4.99 5.30
ASB 4.75 4.29 4.29 4.34 4.39 4.79
4.99 4.29 4.99 4.39 4.49 5.15
Kiwibank 4.75 4.29   4.29 4.39 4.99
Westpac 5.15 4.25 4.95 4.29 4.49 4.89
             
4.65 4.39 4.45 4.45 4.59 4.99
HSBC 4.85 4.19 4.19 4.19 4.49 4.99
HSBC 4.50 4.25 4.25 4.15 4.55 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%.

Update: This version corrects for an error related to the SBS rates mentioned in the copy.

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