Higher home loan rates are announced by SBS Bank and these include a rise in their floating rate. Four 'specials' are increased too

SBS Bank has announced a series of home loan rate increases that will come into effect on Monday, February 27, 2017.

They are raising their 'special' six month fixed rate to 4.99%, an increase of +24 bps from 4.75%.

They are raising their 'standard' one year rate by +10 bps to 4.99%, but leaving their one year 'special' unchanged at 4.45%.

Their three year fixed 'special' is going up +14 bps to 5.25%.

Their four year fixed 'special' is rising by +20 bps to 5.65%.

And their five year fixed 'special' is up by +16 bps to 5.85%.

In addition, they are raising their floating rates. These are going up +11 bps for residential customers to 5.65%, and for customers on their advance equity loans to 6.85%.

Existing clients won't see the floating rate rise until 27 March, 2017 although the new rates will be effective immediately for all new business.

To qualify for SBS Bank's 'special' rates, they must only be for Residential and Residential Investing lending with a minimum of 20% equity (or greater when Residential Investing lending restrictions apply). Bank members can access them with any level of existing lending, but new customers require minimum lending of at least $100,000. They are not available with commercial or rural loans, or SBS Advance (Reverse Equity Mortgage) loans. They also require the borrower's primary source of income to be paid into a SBS Bank transactional account.

SBS Bank floating rates only apply to residential owner-occupied lending. An additional +0.50% applies for residential investment properties.

SBS Bank last raised home loan rates on January 25, 2017 and a few days later when they withdrew their 4.19% one year 'special'.

Today's changes do not alter who has the leading carded rates for mortgage borrowers. HSBC Premier has the market leading position for all terms at this time except for 5 years where Westpac's 'special' is lower. Other than HSBC Premier, ANZ now has the lowest rate for one year, the Co-operative Bank has the next lowest 18 month rate, and TSB Bank has the next lowest rates for all terms 2 to 5 years.

A review of the table below also shows that the TSB Bank ten year rate at 5.75% is currently an exceptional deal for borrowers who want to lock in long term and have the view that rates will continue to track higher.

See all banks' advertised, or carded, home loan interest 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 
  % % % % % %
4.39 5.05 4.79 5.49 5.70 5.85
ASB 4.59 4.75 4.79 5.09 5.49 5.69
4.59 5.05 4.79 5.09 5.89 6.09
Kiwibank 4.45   4.79 5.25 5.65 5.85
Westpac 4.59 5.05 4.79 5.09 5.69 5.49
4.55 4.70 4.85 5.25 5.55 5.75
HSBC 4.19 3.99 4.39 4.89 5.29 5.59
HSBC 4.45 4.75 4.75 5.25 5.65 5.85
4.45 4.75 4.75 5.05 5.45 5.50

In addition to the above table, BNZ has a fixed seven year rate which is 6.15%.

TSB Bank has a ten year fixed rate of 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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So 1 year fixed rates are pushing 4.5% and >18 month rates are pushing 5%... 5% for 1 year and 6% for 3 years fixed by July? Should be interesting :)

Sorry, but interest rates should not be rising at all.
Have a look at the U.S. Rates and I think we will see very few rises from now on in.
It looks worse than it actually is because every slight rise from every Bank is being reported.
Banks are trying to get people to fix long term to hook them in before rates start declining again.
You won't see fixed rates over 6 per cent again for the shorter terms, world can't afford it!

Why do you repeat the same thing over and over. As has been said before - New Zealand is NOT the USA - if you want the interest rates that you get in the USA - MOVE to the USA. Secondly the US interest rates have been increasing


Lastly why are you so concerned. If you have the returns you say you are getting - what does an interest rate increase matter. Your statements don't pass the sniff test.

Edir : why don't you compare New Zealand mortgage interest rates with Russian mortgage interest rates (hint Russian interest rates are higher) .

Russia is under US sanctions. So it wouldn't be correct to compare NZ rates to Russian rates. Rather compare NZ rates to Australian rates. Clearly we are ripped off here.

I think you miss the point - you can't compare interest rates across different economy's - it 's not that simple. New Zealand is a small open economy that spends more than it earns (and has done so for some time). There is a risk premium attached to New Zealand.

NZ is overcharged with very high interest rates. NZ is a very low risk economy.
However, NZ is known as a passive population with a high acceptance of monopoly/duopoly overcharging by building suppliers, groceries and finance amongst other products/services.


Why is New Zealand a low risk economy - please explain. We are largely an agricultural based economy (which is largely a price taker rather than a price setter) - we have few natural resources - a bit of coal, oil, natural gas and gold - but we have no big commodities that the world needs or wants - compared to Australia. We continuously spend more than we earn with the rest of the world - this has to be paid for some how. While I don't disagree with you regarding New Zealanders being overcharged for retail products - the interweb has levelled the playing field to a degree, New Zealand is a small player (I believe the New Zealand economy is a fraction of one percent of the world economy). New Zealanders have been listening to the Kool Aid for too long and fail to understand how insignificant we really are.

Suck it up ladies - we are not as good as we think we are.

Well, you've certainly bought the line from the 1% corporate/banking elite.
On a stability scale & economic connectedness rating we are above most other countries in the world.
Production & export of raw commodities is only one measurement. E.g. Our export education is our no.5 export earner. Tourism another.
Our system of govt, social stability, freedom of lifestyle, desirability as a place to live puts us higher than many industrialised countries.
So, we are paying a very high premium on our interest rates, business overdrafts of 15+%, mortgages of 6% where many SMEs get their funding from, loans, etc. The overcharging is mainly because they can get away with it.

New Zealand has been declining in the OECD rankings for years (we used to be on top). You say

"Our system of govt, social stability, freedom of lifestyle, desirability as a place to live puts us higher than many industrialised countries."

these things don't pay the bills. Most mortgages aren't 6% - yet. I think you are using a bit of hubris to overstate your argument. While education and tourism are good export earners they can be fickle and as has been pointed out some of the education providers in New Zealand would not rank very highly if audited ( we are selling lemons).

And you still haven't explained why New Zealand is a low risk economy.

Those features do actually pay the bills indirectly, in the form of immigration, foreign purchasing of property & businesses, international student fees, etc. Banks and accreditation agencies also do put a financial value and rating on social stability etc as investors money etc is safer.
If NZ had a couple million Germans or Americans living here they would demand the banks stop overcharging on interest rates. As it is NZers accept conditions and have a pricetaking mentality and generally tolerate the high interest rates ( relative to Israel, UK, USA, Germany, Sweden, etc)
Perhaps you could travel: try Africa, Middle East, Easfern Europe, South America, etc, then ask - NZ risk rating = low.

While ratings agencies do put a weighting on stability etc, the most recent reports have emphasised the housing market and it susceptibility to minor interest rate increases as a cause for concern - this is a pure economic risk. You seem to make an assumption that I haven't travelled - I have been to many countries. When in Washington DC the one thing I remember vividly was the police sirens all night.

The main problem with much of our foreign student sector is that - contrary to the National government's silly claims - they do not come here for the high quality of education, but for the back door visa entry. It's a $20k entry stamp to NZ.

A friend of mine worked in the PTE sector. He recounted the Director of the school - when questioned internally about providing better quality resources to the students - saying "It' doesn't matter. They don't care. It's all about the work-to-residence visa to them. So we don't need to spend that money."

And this was one of the "reputable" schools in Auckland.

Spot on The Man

You do not like LVR's or interest rate increases The Boy. With rents dropping in Christchurch along with property prices while interest rates increase you certainly sound desperate and stretched.

Gordon, sorry but not worth responding to your total BS and you know nothing at all about the Chch market at all.
Personally the world would need to end before I was desperate, and remember Gordon that 100k offer is always there for your acceptance, otherwise close it!

Ouch hit a nerve.
"Banks are trying to get people to fix long term to hook them in before rates start declining again".
Why dont you wager your $100k on the above happening Mr Man?

Yes we know. You do sound very very desperate though and angry. Not surprised. All eggs in wrong market. Banks are simply paying more to borrow and passing it on. And it will get worse as inflation increases world wide.

Interest rates will soon be decreasing as banks sense the servicing limits of the borrowers with 700k mortgages in Auckland, & as Trump starts tax cuts stimulus loosening up money globally.
Small rate rises are currently opportunistic, & seeking to lock in borrowers for 2 years plus.

Most bank test rates are 2 to 4% higher than current rates. I'm not sure what economic models forecast but with interest rates ticking up you might reasonably expect wages to follow as the employment market tightens. However I have no idea how much immigration will curtail wage growth,my immediate thought would be perhaps that's enough to keep the employment market slack.

Just my opinion but taking on large amounts of debt in an overheated property market (by world standards) on the premise that rates will go down because of Trump tax cuts would be a very risky position to take. The downside scenario is very bad. The guidance from the US Federal reserve is US interest rates will go up which affects offshore funding costs for NZ mortgages. Factoring in the potential for rising oil prices which has a direct impact on every commodity and consumer good consumed will likely cause inflation to rise in NZ. The Reserve Banks main tool to curb inflation is to increase the OCR which again likely trickles down to higher mortgage rates. But whether any of this actually happens is mute my main point is that people should be careful and not take on debt without testing their ability to cover it if interest rates do in fact go up. The risk of renting for a little longer, saving more and getting oneself into a better financial position feels like a more prudent approach. As far as the 'Specvestors' I keep hearing about on here that are highly leveraged into investment properties it's probably time to consolidate to weather the same type of potential conditions or work on yields (rents) to better cover your potentially changing liquidity situation. 'Drops the mic and walks off stage'

The one problem that many young are potentially worried about is the propensity of this current government (and many of the older generation) to sell Auckland out from under them, to overseas buyers / rich migrants.

Talk to any migrant friends, they'll tell you there's essentially an endless stream - relative to market size in Auckland - of rich would-be migrants wanting to move from India, China and other countries, to NZ. They're predicting massive amounts of Auckland population to be made up of these in the next 20 years.

Young Kiwis don't have a chance, in the face of that. Auckland is too small and wages are too low to resist that.

Where the post-war generations worked hard to leave the Boomers a good lot, too many of the Boomers are working only for their own short term self interest even if it means selling out their children and grandchildren.

There is actually no reason at all for NZ interest rates to go up at the moment, swap rates are down and Westpac & ANZ announced improved profits meaning their margins are not squeezed

Israel, Mortgage rates 3%.
Similar economy to NZ & higher risk rating.

How is it a higher risk.

NZ has a very large moat around it.
Israel is surrounded by 15+ enemies whose mission statement is to drive them into the sea.

And Israel has the best military in the region. You say New Zealand has a moat - that also emphasises our isolation from the our markets - our nearest neighbour is several thousand miles to the west of us. You also seem to assume that political risk immediately translates into economic risk- while there most likely is a strong link other factors will also play an important part in defining the overall risk ( and hence interest rates) that a country faces. I think you are being overly simplistic.

Israel is just one example to illustrate that compared to other similar countries (economically & socially) NZ suffers from very high interest rates.
NZs high interest rates are damaging small businesses, and family farms/orchards, and penalises home owners, and give large global corporate entities an unfair advantage as they can raise cheap finance on a global market.
The oft cited reason for our high interest rates is so that the RB can somehow suppress Auckland house prices. That is a very poor reason, as the Govt is running policy to inflate the Auckland housing market.
Israel is definitely more at risk economically than NZ on a banking/finance evaluation - however I agree with you that they have a superior military & strategists to overcome, & their technology generally is second to none.
No one has really come up with a reasonable explanation for NZs high interest rate settings. High interest rates both imposed externally by risk assessments, & voluntary high interest rate settings internally by RB etc.

You play as gospel that high interest rates are bad - but what about savers and investors (in real assets, not overpriced Auckland slumlords) ... don't they deserve reasonable returns? As per all the comments in this thread, NZ has VERY LITTLE control over NZ interest rates - wholesale prices, inability of NZ to spend less than it earns, NZ exchange rates, RBNZ Core funding ratios ... these are all important factors that differ to many other economies.

Firstly Israels central bank rate is 0.1% vs. NZ's 1.75% they can't even cut interest rates to do any quantitative easing to stimulate inflation etc. without going negative - you could have to pay interest to put your money in the bank. That's why their mortgage rates are so low. Secondly a 3% rate is great if you can fix it. I don't live in NZ and I have a 30 year mortgage fixed at 4.0% - my rate cannot change. NZ rates are what they are today. I wish NZ did have that option but if you borrow today at 4.5% fixed for 18 months I would be stress testing my ability to pay my mortgage at 150bp higher to limit the risk of losing the roof over my families head.

According to the latest Alternative Facts and fake news from the economists and banks the OCR rate and mortgage rates are disconnected! Lol.

A few contrary opinions discussed today. The Fed will increase by at least 25 bps this year. The last move up didn't cause a disaster and another small move up is unlikely to cause a massive problem. There are a lot of people in the US that are doing alirght with the low interest rates.

Oil is going to stay low for a while as US production is still high and they're taking share from OPEC and filling orders that would have been empty due to OPEC cuts. US ports are general not taking oil shipments as storage is full. Expect to import more deflation.

Overshore borrowing is going to increase costs for banks as rates are going up. NZ branches are under pressure to increase profits. Something is going on with the Australian banks and it's hard to say what it is. I'm wondering if default rates are climbing, if so that puts additional capital requirements on banks could increase offshore borrowing even more. Who knows where interest rates will really go over the next few years, split your mortgage and hedge your bets either way.

The new US production coming to a the market is mostly out of the Permian basin and the economics of those recent discoveries in the wolf camp formation etc. are pinned on oil getting to $60-$65/bbl. That's about 15% increase from today. It may take two years but capital will eventually stop being spent if that price isn't met. There is always the risk of Saudi flooding the market etc. but the current growth is in Texas. That 15% increase will flow through into every gallon of milk, car tire and plastic toy we all buy. My concern on interest rate pressure is certainly for the people taking loans today that will have variable interest rates in 2018/19.

We still have low rates right now so there could be an issue in 2-3 years (which are popular fixing terms right now) with higher interest rates. I'm waiting to see how many mortages go into default this year with the low interest rates we have right now.

United States current 15 year fixed rate mortgage rate is 3.5 per cent
you can get cheaper rates on shorter terms.
So where are these higher U.S. Rates that people are saying are occurring?

The Man - I live in the US and my rate is 4% fixed for 30 years which is about the lowest for a 30 year term. You can get 3.5% for 15 but many people don't do it because they can't afford the higher payments - It's about $900 a month difference on a $400K mortgage. The sentiment here is certainly that if the Fed raises rates that mortgage rates will go up too proportionately. We are very lucky in the US that you can get 15/30 year fixed rate terms and we get to deduct our interest expense on our personal income for your primary residence. So the real rate of your mortgage is about 25% lower depending on your tax bracket. So my real rate is about 3%. I think the NZ government should do the same deduction and mandate longer terms on home loans to take the interest rate exposure away from home owners.

I'm not sure the fin sec here can even buy 30 year money... and if they did, it would be at a premium. People bleat about break fees now - imagine breaking 2 years into a 30 year term.

There is virtually no interest (per RBNZ data) in the 7 and 10 year products some banks offer, perhaps due to the NZ churn and capital gain mentality

My understanding is that the US allows deduction of interest expense because every house is treated as an asset and gains are subject to tax... I for one support both sides - the taxing and the deducting of interest. Why not? (from a logical point of view - make $100k working = pay tax ; make $100k selling your house = no tax... sounds fair, what could go wrong)

For the US you only get the personal tax deduction on your primary residence and there is no capital gains on your primary residence - investment properties and second houses are different.

Also something good about the US is there is no 'break fees' or early payment fees. If you want to refinance you can do so without incurring fees from your current mortgage provider.

presumably the lack of exit fees relate to the stability of the long term bond rates they've used to fund. I'm not sure I would be too quick to emulate the US banking system ... don't trust a system where "checks" still rule. I hate dealing with the banks every time I'm there. Also, Trump.

Paradox, Do you beleive that mortgage interest rates are going to increase substantially as many on here are hoping.
As we know the pooh hit the fan when the rates went up from zero per cent, and I don't beleive that U.S. Will want or need that again!

I think interest rates will rise in the US. The Dow is at an all time high and has already baked in at least one rate increase. I don't see the OCR going up in NZ this year. How that affects NZ mortgage rates is anyone's guess but if I had to wager I would say they have a greater chance of going up than down. Just my two cents.

If this whale is harpooned things will get interesting. Would be game over in the NZ speculation market. "In the past year alone, the Fed bought $387 billion of mortgage bonds just to maintain its holdings. Getting out of the bond-buying business as the economy strengthens could help lift 30-year mortgage rates past 6 percent within three years, according to Moody’s Analytics Inc."