ASB reduces two fixed home loan rates, taking its fixed three year offer to a market leading 4.79%. The Co-operative Bank also trims some rates

Home loan rates are continuing to be adjusted lower for selected terms.

These changes come even though the RBNZ is not changing official rates.

ASB has today (Thursday) reduced its two year rate by -4 bps to 4.55%, matching ANZ with a rates that is mid-range for that term.

But they have also reduced their three year rate by -10 bps to 4.79% and this new rate is market-leading.

ASB's new three year rate beats Kiwibank's 4.85% rate by -6 bps, the next-lowest carded rate offer in the market.

The difference between ASB's new three year rate and the lowest two year rate by both BNZ and Kiwibank at 4.49% is now only 30 bps. (HSBC Premier is still offering 4.29% however if you can meet their criteria.)

Yesterday, the Co-operative Bank also lowered some home loan rates. Their 18 month fixed rate was cut by -4 bps to 4.95%, and their three year fixed rate was cut by -10 bps to 4.89%. Neither are market-leading positions.

In wholesale markets, two year swap rates had risen by +17 bps from February to mid April, but they have pulled back about -5 bps since.

Three year swap rates had risen +14 bps over the same period, but they too have retreated -5 bps since.

Mortgage rate changes are now fairy small, indicating that banks' room to move is limited. Reversions are also common, so lower rate announcements are often limited and followed by quiet rises back to prior levels. That suggests borrowers need to take opportunities when they appear. And, as always, shop around and negotiate.

Both the ASB rates mentioned here, like the Co-operative Bank ones, are their 'specials' (or in the Co-op case, for 'owner-occupiers'). Higher rates apply for 'standard' lending. ASB's 'specials require at least 20% equity in the secured property. Unlike some other banks, they don't overtly require salary credit to one of their current accounts, nor the taking on of 'other products'.

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 4.35 5.15 4.55 4.99 5.89 6.09
ASB 4.95 4.39 4.49 4.55 4.79 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 4.55 4.94 5.89 5.59
               
4.80 4.39 4.45 4.59 4.89 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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8 Comments

Why are those 5 year rates so high? Surely there is no demand at those levels? I guess kiwibanks rate is almost ok.

Higher risk, forecasting rates a year or two is easy but when you get out to 5 years banks are risking their shirts.

I've been working in banking for the last 6 years, 3.5 of this dealing with home loans. In this time I have done less than a handful of 5 year terms. I can't imagine TSB's 10 year term, or BNZ's 7 year term would have more than a few customers signed up either.

I suspect mortgages overseas have much lower break fees or "prepayment penalties". There has to be a reason why NZ mortgages are on much shorter fixed terms than other nations.

Bilbo, no idea what the penalties are in NZ, but our UK 5 year fixed (3.04% ending this year) had a penalty percentage of the original mortgage value;
4% year 1
3% year 2
2% year 3
1% final year

It is an offset mortgage, which are always slightly more expensive. We have paid very little interest over the last 5 years cause we sling our surplus in there.

What are the NZ penalties like?

I locked in a 7 year rate with BNZ at 5.95 a year ago. Paying the extra 5% off a year and i think its all paid off in mid 2022.

Part of me wishes i'd just locked in the special rates - i was offered 4.25 by Anz when negotiating last year.

But i'm happy with the certainty and the extra interest worked out to bugger all given the term will only be about 5 years all told till its gone. Maybe 2-2.5k or something.

Yes I went 7 years at BNZ a long time ago when it was 8.6%. This was great for a couple of years then interest rates fell to record lows. I guess it was knowing your repayments, it could have gone up. Its also relative to how much your borrowing, the 7 years saw me pay it off anyway. Who knows where the rates will be in a few years, the only way is up I recon.

Burberry - I hope your principal owing was low. That's is absolutely insane fixing for that long on that rate. We are heading into a period where owner-occupiers will get sub 4% rates. This has happened across the ditch last year following number of restrictions on lending and we will see this in the next 12 months.