Ahead of the Spring selling season, and following big wholesale rate drops, the second largest home loan lender cuts its four year fixed rate sharply

Hot on the heals of yesterday's sharp fall in wholesale swap rates, ASB has launched a new super-low four year fixed rate.

Their new rate is 4.95%, a -44 bps drop from 5.39%.

This is now the lowest four year rate in the market, even lower than HSBC Premier's recently lowered 4.99% rate.

This is also the lowest four year rate since July 2016 when, again, it was ASB who offered 4.59% back then until October 2016.

Today's wholesale swap rate for a four year duration opened at 2.28%. Back in July to October 2016 it averaged just 2.08%.

Yesterday's sharp fall in swap rates may be enough for lenders to contemplate reduced mortgage rate offers, especially as we are now just a few weeks away from the start of the Spring real estate selling season.

But the two triggers for yesterday's wholesale rate drop (the RBNZ dovish MPS, and the Fonterra trading halt) may be 'one-offs' that get reversed as new data comes to light, or the markets may judge there has been an over-reaction. Most lenders will wait a while to assess whether this is a permanent shift lower.

The news will not be good for term deposit savers; it could equally presage a drop in offer rates for them.

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 July 9, 2018 % % % % % % %
               
4.99 4.29 5.15 4.49 4.85 5.85 5.99
ASB 4.95 4.29 4.39 4.49 4.79 4.95 5.59
5.35 4.29 5.05 4.49 4.85 5.89 6.09
Kiwibank 4.99 4.19   4.39 4.85 5.19 5.39
Westpac 5.25 4.29 5.15 4.49 4.85 5.89 5.59
               
4.80 4.24 4.45 4.49 4.85 5.39 5.59
HSBC 4.85 3.99 3.99 4.19 4.69 4.99 5.29
HSBC 4.99 4.19 4.49 4.49 4.85 5.39 5.55
4.85 4.24 4.35 4.49 4.85 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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26 Comments

I think we will see a sub 4% 1 year rate from most banks before Xmas.

Could the tide for "imminent increase of interest rates" and "normalisation of interest rates" from so many commenters starting to turn?

Not sure what this fascination is with some of the commentators on this site keeping an index of people's narratives and then celebrating when they're wrong? Why do you hold a grudge?

"Yes!!!!! Ha ha, I was right and you were wrong! Na-nana-naa-nah! I bet you'll learn your lesson now for having an alternative opinion/prediction to mine!"

It is probably a belligerent response to the vulture crew's earlier claims e.g. interest rates will sky rocket soon so all you filthy specuvestors will bleed out and we will feast on your corpses (i.e. buy your houses on the cheap).

The "you guys were full of ####" response is a mixture of relief and ribbing of the vulture crew.

It was the express malice in the vulture crew's earlier opinions which has led to the "na-na-na-naaa-na" response.

It is probably a belligerent response to the vulture crew's earlier claims e.g. interest rates will sky rocket soon so all you filthy specuvestors will bleed out and we will feast on your corpses (i.e. buy your houses on the cheap).

The vulture crew and the specuvestors both seem oblivious to the reality that the only one making sunshine out of this is the middleman (the banks). Both factions really have no idea as to how things will play out in their own self interests. The middleman will win regardless.

.

BuyLowSellHigh, I see you had second thoughts and edited out the "carrot" insult directed towards J.C.

Its hard dealing with commentators who raise perfectly valid points - aye ;-)

Yes, I felt bad for my “computer literacy of a carrot” remark.

BTW, you earlier asked to be educated on why the upswing phase of the cycle will being in 2021/22. In case you missed it, here you go -

Looking at how NZ's property cycle has turned over historically gives a reasonably good idea of when upswings will occur. Data now shows that the market peaked in 2016, so upswing phase of the cycle can be expected in about 2021/22. In terms of what combination of factors will affect the demand side of the equation - less restrictive lending by banks, higher incomes, more consumer confidence in the market, immigration starting to rise again. In terms of supply - we still won't be building enough.

agree, but not sure it makes sense to aggregate the entire property market. Provinces still going strong. Housing debt acceleration will likely become positive later this year. Foreign buyers still conspicuously absent in Auckland. I wouldn't be surprised if the historical provinces:Auckland ratio undergoes some "mean reversion" over the next year or so.

It is probably a belligerent response to the vulture crew's earlier claims e.g. interest rates will sky rocket soon so all you filthy specuvestors will bleed out and we will feast on your corpses (i.e. buy your houses on the cheap).

The vulture crew and the specuvestors both seem oblivious to the reality that the only one making sunshine out of this is the middleman (the banks). Both factions really have no idea as to how things will play out in their own self interests. The middleman will win regardless.

It is probably a belligerent response to the vulture crew's earlier claims e.g. interest rates will sky rocket soon so all you filthy specuvestors will bleed out and we will feast on your corpses (i.e. buy your houses on the cheap).

The vulture crew and the specuvestors both seem oblivious to the reality that the only one making sunshine out of this is the middleman (the banks). Both factions really have no idea as to how things will play out in their own self interests. The middleman will win regardless.

Point taken NZdan, even if I got lots of grief in the past for calling rates to stay low, I should be better than that. Good point

..what might affect of an ailing NZ dollar be? Surely the AUS masters won't be so happy with the lower valued repatriated millions - will this cause an interest rate hike?

Let's see Yvil.. you seem to think that NZ is the same as China or Japan... we're so tiny in terms of GDP that we have no hope of currency manipulation, control or devaluation.. we are just a small boat on the tide and the wind... If either change course, we just have to go with it, without choice...

I do feel sorry for the numerous elderly who keep their money in term deposits. Not much chop for them.

But there's a stronger incentive for others to get their money out of the bank and buy a home - or for businesses to invest in land/buildings, plant, machinery and equipment etc.

In fact, term deposit returns are so pitifully low (especially after tax) that some people might well prefer to keep their money in an "on call" account, rather than suffer the inconvenience (and cost) of not having funds available when wanted.

In that sense, the opportunity cost of holding funds in term deposits has risen substantially.

From the discussion in my work cafe this morning, it's clear that people are fast working that out.

TTP

They should change it so tax only applies to the return in excess of inflation
Likewise you should only be able to claim a rebate on the interest paid in excess of inflation.
Would probably be cost neutral don't you think?

Hi JimboJones,

In principle, I agree with you.

It's something that Winnie Peters might take up - on behalf of the elderly (and those incapacitated) who often rely on term deposits as a (now much diminished) source of income.

But, realistically, the CoL is cash-strapped. It's not exactly looking for ways of reducing its tax-take.

And it has enough other problems to deal with, including KiwiBuild and the Foreign Buyers Ban - both of which have turned into major headaches.

TTP

(Whispering) How long will it take before TTP figures out this article is actually about fixed term mortgage rates........

(Whispering) How long will it take before Retired-Poppy figures out there's a connection between bank lending and bank borrowing?

TTP

Ha-ha-ha :) in all seriousness, spending lunchtime with your Mum discussing alternative investment strategies hardly constitutes a Boomer revolution against term deposits - lol!

As I fully anticipated, a little friction from one of the 10% who own 40% of the debt is entirely understandable given the uncertain times in which we live.

But there's a stronger incentive for others to get their money out of the bank and buy a home - or for businesses to invest in land/buildings, plant, machinery and equipment etc.

In fact, term deposit returns are so pitifully low (especially after tax) that some people might well prefer to keep their money in an "on call" account, rather than suffer the inconvenience (and cost) of not having funds available when wanted.

Between 60-70% of NZers have <$10K in cash savings, whether they own a home or not. What kind of property or business are they going to invest in with <$10K?

But there's a stronger incentive for others to get their money out of the bank and buy a home - or for businesses to invest in land/buildings, plant, machinery and equipment etc.

In fact, term deposit returns are so pitifully low (especially after tax) that some people might well prefer to keep their money in an "on call" account, rather than suffer the inconvenience (and cost) of not having funds available when wanted.

Between 60-70% of NZers have <$10K in cash savings, whether they own a home or not. What kind of property or business are they going to invest in with <$10K?

TTP

Didn't Kiwibank just raise their 200 day term deposit by 15 basis points? Have you got any opinion as to why they would feel it necessary (the day after the Governor's comments) to decide on being more generous to those that invested their saving with them?

Nic.

(double up)

Yep, but can you answer the question? I don't think you can.

Visit your local Grey Power group.

You'll find plenty of them lamenting the next-to-nothing returns from their term deposits.

They don't think it's fair. Personally, I have empathy for them.

TTP