Kiwibank has announced some home loan rate changes that will become effective on Monday.
It is raising its one year fixed home loan 'special' rate by +6 bps to 4.35%.
And it is cutting its two year fixed home loan 'special' rate by -10 bps to 4.39%.
These changes come after HSBC launched its new eighteen month Premier fixed rate 'special' of just 3.85% which is a modern all-time low offer. (Some customers claim - in our Comment stream - they have even acheived a rate of 3.79% after negotiation with HSBC, but these reports are unconfirmed.) HSBC says its new low offer has met with "a strong response".
But Kiwibank's changes are more focused on having a meaningful difference with the offers of the big four Aussie banks.
Kiwibank's new one year rate at 4.35% will still be lower than most of their Aussie rivals, even after the rise. But the advantage will only be 4 bps - and it is pitched at the same rate ANZ is promoting.
For the two year term however, they will have a good advantage against all those rivals. Each of them has a 4.55% rate, so Kiwibank will start the negotiation with a 16 bps advantage.
However, you do have to wonder how long that advantage will last. Today, a two year swap rate is 2.23%, and while any bank borrowing in wholesale markets will pay a premium to that, the margin-to-swap is 2.16% which is lowish in the perspective of the past few years, but far above margins-to-swap of a decade ago. In a winter market that is relatively low volume, maybe the downside risks are low for banks, but to make a meaningful move in market share, you would think that there is plenty of wiggle-room for negotiation at that level. Kiwibank would want it's advantage to move its needle, otherwise why would they do it?
Kiwibank's 'specials' require at least 20% equity in the securing property.
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 June 6, 2018||%||%||%||%||%||%||%|
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%.