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ASB increases its floating mortgage rate hot on the heels of fixed-term rate increases

ASB increases its floating mortgage rate hot on the heels of fixed-term rate increases
25th Nov 16, 11:10am by Gareth Vaughan

Fresh from increasing a series of fixed-term mortgage rates, ASB is also lifting its floating, or variable, mortgage rate.

ASB and its Bank Direct brand are increasing their floating mortgage rate by 10 basis points to 5.65% from 5.55%.

The new rate is effective for existing floating home loan rate customers from December 7, and for new customers from November 30. At 5.65%, ASB's new floating rate will be similar to those of most of its rivals. Kiwibank currently has the lowest carded floating rate on offer from a bank at 5.25%.

On Friday ASB also raised all mortgage rates for 18 month to five year terms.

Recent fixed-term mortgage rate hikes from ASB and other banks such as ANZ and BNZ, follow sharp rises in wholesale swap rates for terms of three years and longer. The steepening of the rate curve has been quite marked over the past two weeks. However, ASB's floating rate hike is a surprise. On November 10 the Reserve Bank cut the Official Cash Rate to a new record low of 1.75%.

ASB did, however, grow its residential mortgage lending by a net $2.782 billion during the six months to September 30, or around 3%, and may now be looking to slow this growth down.

See all bank advertised, or carded, home loan interest rates here.

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25 Comments

by  Zoltuger  |  25th Nov 16, 11:14am 1480025649

Brings ASB into line with the rest of the market. Luckily I negotiated an extra 10 bps discount on my floating mortgage just this week.

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by  JimboJones  |  25th Nov 16, 11:44am 1480027455

Why would anyone have a floating mortgage?

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by  Zoltuger  |  25th Nov 16, 11:51am 1480027897

So you can pay the floating portion off faster than the bank allows on a fixed mortgage

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by  Boatman  |  25th Nov 16, 11:46am 1480027619

Any news on increasing the retail deposit rates they are offering to savers ?

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by  bigblue  |  25th Nov 16, 12:10pm 1480029044

Just a trick being played by banks to force the 40% of people who are floating into fixing - then in January they will drop the floating and fixed rates after the Reserve Bank announces an emergency OCR cut once they realize the economic disasters that is descending upon Wellington post quake.

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by  dictator  |  25th Nov 16, 1:30pm 1480033838

I am wondering what the figures will show. There's been less activity in some areas, it's bound to affect productivity and the tax take for the Government. That said I am dealing with less earthquake jobs than what I anticipated. At this point I am expecting the damage to economic activity to be worse than the physical damage.

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by  mvgsmf  |  25th Nov 16, 1:49pm 1480034958

Seems irrelevant what the Reserve Bank does right now - the last 2 cuts have not been passed on by the banks anyway?

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by  bigblue  |  25th Nov 16, 12:11pm 1480029079

Profit taking bankers have no excuse for this rort!

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by  arranging  |  25th Nov 16, 12:53pm 1480031591

I just got 4.67% fixed for 5 years from Westpac on $200,000 loan, was a Westpac customer. I thought it was a good rate, your thoughts?

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by  arranging  |  25th Nov 16, 1:01pm 1480032112

Im paying 5.15% floating with Westpac on a loan less than $8000.

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by  head_down_bum_up  |  25th Nov 16, 1:04pm 1480032262

For a 5 year term I'd take that.

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by  arranging  |  25th Nov 16, 1:10pm 1480032611

I tried them at 4.5% twice to get that rate, first offer was 4.79% which i declined.

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by  gordon  |  25th Nov 16, 1:08pm 1480032515

On the face of it a good move. I am thinking that interest rates are going to steadily move up from here. On $200k one or two per cent does not make much of a difference but on say $800k it does. Despite the recent drop in the OCR the Banks seem hell bent on increasing their lending rates. The housing markets in places like Auckland and Christchurch are off their highs and now it is just a matter of where they are going to go to.The housing data for November will be interesting. If what the Aucklanders were telling me when I was up there last week is a true indication of where the market is at then we can probably expect another softening from October.

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by  arranging  |  25th Nov 16, 1:24pm 1480033495

I could never service a 800k loan, must be earning mega bucks to service that in my world of lowish income.

I agree i think long term rates are about to move much higher very fast.

Id take Westpacs 5 year special.... last bank to move higher.

I think they are hunting to lock in good customers with a good history of payment.

Their allocation at good rates must be running out.

I think westpac will adjust higher very soon.

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by  Zombie ponzi  |  25th Nov 16, 2:13pm 1480036419

Looking at the auction results page here on interest.co.nz it seems that hardly anything is selling at auction - post auction who knows.

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by  SmoKey  |  25th Nov 16, 1:26pm 1480033611

Seems like a good deal, 4.67% for 5 years. Time will confirm that.

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by  SmoKey  |  25th Nov 16, 1:27pm 1480033661

Interest rates are going up, now that the election is over in the US. The Fed will be making its move soon.

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by  bigblue  |  25th Nov 16, 2:56pm 1480038984

10 years at 5.75% at TSB may be safer

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by  arranging  |  25th Nov 16, 3:14pm 1480040051

Wouldn't it be great if all banks offered 6, 7 8 9 and 10 year rates.

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by  David Chaston  |  25th Nov 16, 3:40pm 1480041623

Why? Firstly, at present only $150 mln of almost $230 bln is longer than 5 years. I think that is 0.06% (0.0006), a truly tiny market demand. It costs banks real money to set up the processes for these types of contracts and they just won't spend the money if there is no real demand. If there was real demand you would expect higher market share from the two banks that offer it now.

And secondly, you could get into a severe trap if you need to quit the mortgage early and get faced with a break fee. A very long mortgage term to run could be very very expensive to exit. Remember, it is a legally binding contract. You might think in a rising rate market the risk would be small, but guessing what interest rates will do in five to ten years is itself a very uncertain thing.

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by  bigblue  |  25th Nov 16, 4:16pm 1480043815

Many people will be stung by this sudden increase in interest rates. If rates continue to increase then it is likely there would be no break fees on one of those ten year deals. I seem to recall at some point there was an even lower ten year fixed rate on offer.

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by  arranging  |  25th Nov 16, 4:51pm 1480045909

Such a concept would be new in NZ David.

Give Choice build it and they will come, wave break fees after a 5 year period if need be.
Just because it is unknown doesn't be mean there will be no demand.

Market it.

Long term clients

It could take time.

The reason Banks don't do it is because its outside their risk parameter.

Lets be honest

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by  arranging  |  25th Nov 16, 4:58pm 1480046337

If a bank gave us a rate at 4.99 % for 10 years, they would have 55 % of the market share in one year

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by  Desmo  |  25th Nov 16, 6:31pm 1480051911

I bet most of those would squeal when the came to sell and break the agreement and suffer penalities. Where will you be in 10 years? Banks are only the middlemen. They borrow money and lend it on. Who is going to lend for 10'yearsnat today's rates?

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