New Zealand's largest bank tests customer loyalty with higher home loan rates for all terms longer than 1 year, following recent wholesale rate rises

New Zealand's largest bank tests customer loyalty with higher home loan rates for all terms longer than 1 year, following recent wholesale rate rises

ANZ has now pushed its fixed rate offers to new market highs in this cycle.

These changes are for all rates of two years and longer.

The result is a rate offer set that is significantly higher than all its rivals for every term except for 1 year.

Their existing 18 month rate is unchanged at 4.89% but it is +60 bps higher than the ASB offer and +70 bps higher than the current HSBC offer.

ANZ's 2 year fixed 'special' rate has been raised +16 bps to 4.45% and that is +16 bps above the current offers from Kiwibank and Westpac and +26 bps above the current offers by HSBC and TSB Bank.

The new ANZ three year fixed rate has been raised by +16 bps to 5.15% and that is now +66 bps above the Westpac offer for this fixed term, and +80 bps above the current SBS Bank offer.

Their new four year fixed offer is up +9 bps to 5.29% which is +30 bps above the ASB equivalent, and +40 bps above the current offer from HSBC Premier.

And their five year fixed rate has been raised by +15 bps to 5.45%, which is +56 bps higher than what Westpac offers.

All these changes are effective from Thursday, November 24.

ANZ has also raised some term deposit rates and the details are here. ANZ has not advised of any equivalent term deposit rate rises.

These ANZ mortgage rate rises follow earlier rises by BNZASB, the Co-operative Bank, and Kiwibank.

These changes follow the sharp rises in wholesale swap rates for terms of three years and longer. In fact, the steepening of the rate curve has been quite marked over the past two weeks.

Borrowers should expect other banks to respond in similar ways for similar reasons. The availability of low long term fixed rates is closing quickly.

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

A snapshot from the key retail banks is:

below 80% LVR  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
  % % % % % %
4.25 4.89 4.45 5.15 5.29 5.45
ASB 4.29 4.29 4.34 4.59 4.89 5.09
4.29 4.99 4.39 4.59 5.20 5.39
Kiwibank 4.19   4.29 4.65 5.10 5.20
Westpac 4.25 4.95 4.29 4.49 5.09 4.89
             
4.39 4.45 4.45 4.79 4.99 5.19
HSBC 4.19 4.19 4.19 4.49 4.79 4.99
HSBC 4.25 4.29 4.29 4.35 4.90 4.99
4.25 4.35 4.19 4.59 4.89 4.99

In addition to the above table, BNZ has a fixed seven year rate at 5.89%

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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ANZ haven't been competing in advertised rates for a while now. I think their Aussie parents have asked them to stop taking on risk. That 3 yr rate is atrocious.

Perhaps this is a return to a time when floating rates were lower than fixed rates?

That is just the advertised rate. I got much better than that under 2 weeks ago (4.29% for 3 years) and a good cash back on top.

So are they going to raise savings rates to match?

What about retail rates , when are we going to get an above inflation (and tax) rate of return on our savings?

Our real rates of return are basically as close to zero as one can get

The rates offered by banks are a disgrace , and are souring the relationship with the public , who see them as predatory

Sorry, but that is just not correct. ANZ as an example will offer you 3.55% for a one year term deposit. If you are on a 28% tax rate like many folks your after-tax return is 2.56% pa. Inflation is 0.4%. So your real after inflation return is 2.15% pa and that is a long way from "as close to zero as you can get". 

Other banks offer better TD returns - BNZ up to 4%.

Compare these TD outcomes with just about any other Western country. Savers are in a relatively better position here. Be careful for what you wish for.

(You can get higher returns, but for added risk. It is your choice. For example, many KiwiSaver funds, even those schemes offered by the banks, outperform TDs.)

Well that all depends on your personal situation David. Inflation for the basic living costs is there but for luxury goods it is not. For example the price of a nice Merc has dropped considerably but that doesn't affect plebs.

Do you people even read the CPI releases before making your comments?

Why let the truth get in the way of a good story?...

Banks raising rates after a reasonably significant earthquake. Very supportive.

Wow.
It's like they are factoring for risk, or something.
Crazy, huh.

You're implying some sort of moral misdeed by the banks - the earthquake didn't affect a major population centre - it is sad for those in North Canterbury who are affected - but I suspect your comment is more for self interest rather than concern for those who are affected. Your moral outrage is just a little disingenuous....

I wouldn't be surprised to see 4 and 5 year rates top 6% in a year or two.
I for one wouldn't start a term deposit for 4 or 5 years when the return is under 5%, too much uncertainty, too much risk for 3 or 4% return. A lot can happen in 4 or 5 years....

Having said that I bet ANZ would match other bank rates if asked...

Agreed David, the way NZ banks operate is a complete profit gouge of their customer. All they are setting themselves up for is when people come off their fixed terms they will shop around as will I.

How are they profit gouging?

by gouging profit

In what way, though?
At least give a reason..

Hey DaveB1978.
Interesting post you made. I was trying to negotiate with ANZ a few weeks back with some cash on top but they didn't want a bar of it. Even after I mentioned changing banks . Did you switch to ANZ from a different bank? If you don't mind me asking what cash top up did they offer?

I am literally in the process of signing the mortgage offer from ANZ - so may be of help. On a $400,000 loan (moving from ASB), I'm getting 4.19% 1 year 4.49% @ 3 years + $2,700 cash back.

I have asked ANZ for RRA (reserve interest rate agreement) for 3 loans reaching maturity yesterday, lucky timing, I got same as you

If they are lending at %4.25 and paying % 3.6 for deposits. It's lucky for them they don't need deposits to back the loans or it wouldn't be a great business to be in.

http://www.telegraph.co.uk/news/2016/08/24/rock-bottom-interest-rates-ar...

http://fortune.com/2016/03/03/bill-gross-epic-failure-bonds/

Under the Liquidity Policy (available on the RBNZ website) the banks DO have to have deposits to back their loans. So it is tough for them paying 3.6% for deposits as an input cost. Also they can't get enough deposits at the moment so they having to borrow the rest of the money on international markets at a cost even higher than 3.6%.

My understanding is the banks are only required by the RBNZ to hold a certain ratio of deposits to lending i.e. frational reserve banking (https://en.wikipedia.org/wiki/Fractional-reserve_banking).

see http://www.rbnz.govt.nz/regulation-and-supervision/banks/prudential-requ...

Accordinlgy, comparing deposit rates to lending rates is not an accurate indication of the profits the banks are able to generate (as they can lend more then they hold in deposits).

Your comment is well written and researched but not quite correct. Fractional reserve banking means that when the bank takes in $1m in term deposits at 3.6%, it can loan out $900,000 at 4.5% and only hold back $100,000 as a "reserve" in its 'vault' or RBNZ settlement account. However it still must pay the full 3.6% on the entire $1m to the customer placing the term deposit. Put simply, current regulatory rules don't make it possible for the bank to borrow at the OCR to fund mortgage lending. Banks are offering 3.6% on term deposits for a reason... if they could get source the funds somewhere else more cheaply they wouldn't offer 3.6% on term deposits just to be nice.

Ask for 6 month rate , it is the lowest at the moment, (is normally higher than 1 year.), This would indicate to me that the main reason for the hike is uncertainity re the us election etc.