State-owned mortgage lender changes its point of attack, offering market leading fixed home loan rates for terms of three years and longer

Kiwibank has cut more fixed home loan rates, with the changes effective Monday, April 23, 2018.

Three of these new rates are likely to be market-leading.

Its lowest offer is still 4.29%, a 'special' for one year, unchanged, and matching TSB, but not as sharp as ANZ or HSBC Premier.

Its new two year fixed rate will become 4.49% as a 'special', down -16 bps, and now matching BNZ, but not as low as HSBC Premier's 4.29% 3.95% offer.

However, for three years, their cut is -14 bps taking their new rate to 4.85% as a 'special' and that is better than any bank rival.

Also better than any other bank rival is their four year offer which will become 5.19% which is a standard rate and at least -10 bps lower than the next lowest, and a -46 bps reduction.

And their new five year fixed rate will become 5.39% as a standard rate and that is -30 bps reduction, making it -16 bps lower than the next lowest from SBS Bank.

'Special' rates require at least 20% equity in the property involved.

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 March 23, 2018 % % % % % % %
               
4.99 4.25 5.15 4.65 4.99 5.89 6.09
ASB 4.95 4.39 4.49 4.59 4.89 5.39 5.59
5.35 4.39 5.05 4.49 4.99 5.89 6.09
Kiwibank 4.99 4.29   4.49 4.85 5.19 5.39
Westpac 5.25 4.39 5.15 4.65 4.94 5.89 5.59
               
4.80 4.39 4.49 4.59 4.99 5.39 5.59
HSBC 4.85 4.19 4.19 4.29 4.89 5.29 5.59
HSBC 4.99 4.29 4.59 4.64 4.99 5.49 5.55
4.85 4.29 4.39 4.55 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 10-year fixed rate of 6.20%.

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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9 Comments

Hmmm, Is this a drive for more market share or a position that anticipates interest rates further softening, even without another OCR cut. Perhaps it is a bit of both. The problem is though, that any economic stimulation generated by the repeated interest rate reductions so far, seems pretty much spent. Mr Orr appears to believe that a bit of inflation may now be both helpful and necessary. Can anybody advise what role the OCR is likely to play if that is so?

Lower demand as a result of less sales. Banks not lending to developers, so not meeting lending targets. They have to find homes for the money and look at their own growth. My prediction is that this keeps going lower and no increase coming anytime soon. No movement in OCR, as we can't afford the already very high Kiwi dollar going up anymore. I can't see any make correction in house prices either as a result.

I have been continually told by experts that interest rates are going to go up?
This is a bit hard to understand if that is going to be the case!

I wouldnt believe anyone who pretends to know which way interest rates are going.

Interest rates (wholesale) are going up. As to how that affects retail rates is another question... obviously a margin volume play.

Interest rates rising overseas – US in particular.
In a general sense no real discernible rise in retail rates in NZ.
However – due to the above the relative attractiveness of the $NZ has begun to wane – a lower $NZ may be the result.
A lower $NZ leads to higher costs of imported items – inflation edges up?
Now what happens to local interest rates and funding costs?
Over simplification I know.

Why does your table still say HSBC is 3.95%? Their site says 4.29%

You are quite right. Our error. Fixed now.

Can anyone explain to me why NZ does not offer a true "10/20/30 year fixed rate mortgage" similar to what is available in the US? Seems like it would have lots of advantages over the current system, which seems only to benefit banks.
With a fixed mortgage, you know what your payment will be for the entire 30 years. No fluctuations due to interest rate changes. And, at least in the US, if interest rates drop enough, you can refinance your mortgage at the lower rate. Of course there are costs associated with the refinancing, so you won't do this every time the rates drop a small fraction, but as a system it works just fine. You are also not limited to a 30 year mortgage. You can do a 10 or 20 year one and save heaps on interest payments,
In NZ, where you can't seem to fix a mortgage rate longer than 3 years. This, coupled with the high cost of owning a home and high debt to income ratios means the home owner always seems to be just one or two significant interest rate changes away from not being able to make their mortgage payment.
The cynical side of me thinks the answer is that banks in NZ do this because they can. There is no legitimate competition to drive them in this direction. Maybe the government (Kiwibank), should consider the option. I would think people would flock to this type of loan just for the certainty of it.
What am I missing?

Here is just a sample of what you can get in the US today:

30 year fixed: 4.625%
20 year fixed: 4.375%
15 year fixed: 4.125%
10 year fixed: 4.375%