HSBC goes below 4% again

With a new two year rate of just 3.95% HSBC restores its substantial market-leading position for a key mortgage rate offer

23rd Feb 18, 5:41pm by David Chaston

Today (Friday), HSBC reprises its sub 4% mortgage rate offer.

This time it is offering a fixed 2-year home loan rate of 3.95% as a 'special'.

This special home loan rate is being offered to new HSBC Premier customers, and existing Premier customers who borrow at least an additional $100,000. To qualify for this rate, customers must provide an owner-occupied property as all or part of the security.

Minimum deposit and equity criteria also apply.

HSBC Premier qualifying criteria are a minimum of either $500,000 in home loans or $100,000 in savings or investments with HSBC New Zealand.

Today's change comes after almost all their rivals cut carded rates for one to two year fixed terms in the past two weeks, narrowing their market advantage.

At 3.95% this is the lowest of any rate for any term in the new Zealand home loan market. And it is -44 bps lower than the next lowest two year offer, from TSB. It is -35 bps lower than ASB's one year fixed rate offer.

Just having such a rate stand in the market is sure to be confronting for most other banks.

The last time a home loan rate was below 4% was in October 2016 when HSBC offered a 3.79% two year 'special'.

Wholesale rates have been rising, but not at the short end of two years or less.

Also, keep in mind that Kiwibank does have a $2,000 cashback offer on the table provided you stay with the bank for three full years.

If you are in the market for a mortgage, or a rollover, now is a good time to negotiate.

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

Here is the full snapshot of the fixed-term rates on offer from the key retail banks.

below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at February 16, 2018	%	%	%	%	%	%	%

	4.99	4.35	5.15	4.65	4.99	5.89	6.09
	4.95	4.30	4.39	4.65	4.89	5.39	5.59
	5.35	4.39	5.05	4.65	4.99	5.89	6.09
	4.99	4.35		4.65	4.99	5.65	5.69
	5.25	4.39	5.15	4.65	4.94	5.89	5.59

	4.80	4.39	4.69	4.69	4.99	5.39	5.59
	4.85	4.19	4.19	3.95	4.89	5.29	5.59
	4.99	4.35	4.59	4.64	4.99	5.49	5.55
	4.85	4.49	4.65	4.39	4.89	5.55	5.69

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

And TSB still has a ten year fixed rate of 6.20%.

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15 Comments

by Keyser Söze | 23rd Feb 18, 6:01pm 1519362090

HSBC have by far the absolute customer service of any bank out there. Solicitors, agents, and conveyancers all universally recommend if you can affoard to spend the extra $5 to 10k a year go with anyone else - HSBC are awful, they can wreck your settlement, pull out from their pre approval, and be difficult on the way through.

Stay clear.

by MortgageBelt | 23rd Feb 18, 6:11pm 1519362703

When will one of the Aussie or local banks break the 4.0 barrier?
While 3.95% might seem a low mortgage rate, it’s still high compared to Germany, the UK, USA etc.
So much NZ household income is being / has been wasted/diverted to high interest payments to Australian banks and shareholders. On hyperinflated houses pumped up by unrestricted immigration and foreign-related buying.
A licence to materialise/print money and undermine NZ household income.

by David Chaston | 23rd Feb 18, 6:26pm 1519363580

Sorry, but that is a naive understanding of how interest rates work. I have explained it here before. To do what you suggest would break any bank because the exchange rate risk is far, far greater than the interest rate advantage. Yes, you might get a lower rate but the bank that offered it to you would be bust within 3 months! Never going to happen. NZ interest rates are based on NZ wholesale interest rates and NZ deposit rates. It is the same in every country. Getting 'cheaper' money from offshore markets needs to be transferred through the fx swap markets. That is the bit you ignore. But banks can't.

by Nzdan | 23rd Feb 18, 6:36pm 1519364198

2 year loss leader until interest rates head up again? A banks probably quicker to raise mortgage interest rates than deposit interest rates so will probably get a better spread between the 2 so long as they can maintain their capital ratios?

by TainuiBabe | 23rd Feb 18, 7:24pm 1519367066

Loss Leaders are standard banking practice and yes you are spot on. Banks are still trying to lock and load term deposits at a low interest rate right now, as they know the US Fed is going to hammer them with interest rate rises for their offshore borrowings. So it makes sense for them to offer a teaser rate to lock in Term Deposits, while raising their home loan interest rates and profiting from the margin difference and while meeting the new RBNZ capital requirements.

by MisterB | 26th Feb 18, 8:30pm 1519630257

Not sure HSBC is loss leader. Not for them, just for their TD customers. They pay 2.9% for 2 years v 3.6%-3.7% for everyone else. There must be a lot of lazy parked money there

by Noncents | 23rd Feb 18, 6:47pm 1519364834

The year on year record profits, would suggest they have some ability to move.

Forex risks? pfft - they are making money on that as well.

by MortgageBelt | 23rd Feb 18, 6:59pm 1519365558

Ok, fair comment re forex risk from Euroland or US.
But across the ditch there are many sub 4.0 mortgage rates to choose from
http://www.ratecity.com.au/home-loans/best-mortgage
And the forex risk NZD/AUD/NZD is fairly minimal in my experience- having accounts in both countries.

by hmmmmmm | 26th Feb 18, 1:37pm 1519605468

Again MortgageBelt, your comment lacks any kind of basic understanding.

It's not FX risk the banks have, but implied yields of swapping USD's or EUR's back in to NZD via long term FX swaps.

It's difficult to know where to start, but perhaps it would be a good idea for you to look at the wholesale interest rates of each country to start your journey of understanding interest rates.

by MisterB | 26th Feb 18, 2:26pm 1519608383

Will our term depositors also be happy with the much lower term deposit rates of Germany, UK, USA? Not everyone is a borrower you know.

FWIW, HSBC dont have competitive TD rates, have no branch network nor robust digital assets and have poor service. They make Jetstar look good. If that's what 'premium' customers want...

by lalaland | 24th Feb 18, 8:46pm 1519458392

Appreciate what you’re saying but NZ interest rates are not based on NZ wholesale rates. RBNZ can control the short end, but the market dictates the mortgage rate.

That is controlled by market forces + bank funding margins (risk perception)

It’s also why banning foreign buyers is a real nightmare. It may incline them to be less interested in lending to us or leaving their deposits here for us to use.

To take credit from offshore at these interest rates is a privilege, not a right, we need to respect that as a country as we simply don’t have the savings base to fund our deficits.

by MisterB | 26th Feb 18, 2:28pm 1519608522

Yes they are based on NZ wholesale and swap rates. This is influenced by offshore factors, but it's still a NZ market. Don't forget Banks have loan to deposit ratios etc to maintain and are still largely funded by NZ depositors, who are paid above average interest rates v global as well ... two sides, same coin.

by MisterB | 26th Feb 18, 2:30pm 1519608608

And yes, I acknowledge many of those deposits are created by the borrowing, but they still have to be attracted to the specific Bank that needs the funding.

by Grant A | 26th Feb 18, 3:16pm 1519611392

MisterB - they are paid above average deposit rates because they are a rare commodity - its is the last margin last dollar that has to be accessed from overseas that drives the spreads they pay domestically and internationally. If NZers ever saved as much as the rest of them borrowed we could start to expect deposit rates to match international ones - but until then people like Mortgage Belt will continue to frustrate some on here who are clearly involved in the process and actually understand rate setting. Also understand that banks make a good to average return on equity within the NZX contrarily to the populist headline readers opinions.

by MisterB | 26th Feb 18, 8:25pm 1519629911

Accept broad point, but wouldn’t say they are that rare. RBNZ household funding data shows reasonably close gap at the moment (2016 of course showing masses more lending than deposits). You point no doubt being tha5 other jurisdictions have way more deposits than credit demand, hence low cost of credit. Agree with point around returns... average really v NZSX.. but it’s better to throw around figure like “billions of dollars of profit” without also stating capital invested. Akin to telling someone they earn way too much interest by looking at an absolute figure instead of relative one.