BNZ unveils two year 3.99% home loan rate from November 13 as mortgage wars intensify

Hot on the heels of ANZ's 3.95% one-year mortgage rate offer, BNZ has announced a 3.99% two year rate.

The new offer, for BNZ’s two year "classic" rate, begins on Tuesday, November 13. It's a reduction of 30 basis points from 4.29%. The new rate is the second lowest advertised, or carded, two-year mortgage rate on offer from a bank after SBS Bank's 3.95%.

The new rate is available to residential owner occupiers with at least 20% equity, and will be available until the end of November.

The bank's press release quotes BNZ's chief economist Tony Alexander.

“Sustained low inflation, the effectiveness of the Reserve Bank’s LVR rules and the recent cooling in the New Zealand housing market in spite of still strong economic growth have combined to provide a unique set of interest rate conditions that lenders can take advantage of,” Alexander said.

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 November 12, 2018 % % % % % % %
               
ANZ 4.99 3.95 4.85 4.29 4.49 5.55 5.69
ASB 4.95 4.19 4.15 4.29 4.39 4.95 5.09
4.99 4.15 4.79 3.99 4.49 5.19 5.39
Kiwibank 4.99 4.05   4.29 4.49 4.99 5.09
Westpac 4.99 4.19 4.15 4.29 4.49 5.29 4.99
               
4.50 4.19 4.29 4.35 4.49 4.99 5.15
HSBC 4.85 3.85 3.85 4.19 4.69 4.99 5.29
HSBC 4.99 4.19 4.49 3.95 4.49 4.89 4.89
4.85 4.05 4.19 4.19 4.49 4.95 4.99

In addition to the above table, BNZ has a fixed seven year rate of 5.95%.

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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40 Comments

Tempting, isn't it! (sarc/off)

up
11

There is only one reason why banks are cutting mortgage interest rates and it's not competition.
The reason is that demand has fallen off the cliff as prices ease. .
Borrowers are scared of going broke borrowing huge sums of money no matter how cheap the rates.
Instead it's the banks who are now running scared of going broke if they do not lend.
It's only their usurious interest rates on credit cards ( + 17%) and business over drafts ( +15%) that's keeping them afloat.

Surely the banks make the interest margin/profit every month on their existing lending book, is than not enough to survive off?

That is rubbish Ollie.

This time of year is when there is a much higher level of repricing and rollovers, as well as more R/E transactions. It makes it a critical time for banks to compete hard for the available business. If they miss out now, they will find it harder to move their needle to meet their new business targets.

Now is a critical time for them to be in the market with a competitive offer. 

Hi David. Out of interest do you have any time series data for the last few years for say 1 and 2 year rates from the banks that you could chart?

@Hamish That information is available under charts on this website.

found it. Thanks.

This time of year is when there is a much higher level of repricing and rollovers, as well as more R/E transactions. It makes it a critical time for banks to compete hard for the available business. If they miss out now, they will find it harder to move their needle to meet their new business targets.

Given that the retail banks can "push the needle", what are their parameters on "lending more into existence" other than the constraints that the central bank sets for them? Personally, I think they're well out of their depth in terms of brainpower to understand this going forward. Their adherence to the status quo seems completely obolvious to the unintended consequences (not that they're likely to be too concerned given they're ultimately and personally not responsible for those impacts).

Incidentally, I was working with a Japanese corporate in Japan back in the mid-2000s and we would get these special offers twice a year for mortgages. They would also offer insurance (no extra cost) of the primary income earner died so that the remaining mortgage would be paid off by the bank.

Ollie?

Olly Newland

It’s not rubbish at all David. Your view is biased by your Socialist leanings. If business is booming for the banks why discount anything? If there is plenty of demand why offer better terms?
Businesses only give discounts to prop up falling sales or to stay in business.

@BigDaddy Its a basic tenant of capitalism that you can reduce prices to fight for market share... Nothing socialist about it.

"...it's the banks who are now running scared of going broke…"

I struggle to believe this comment could be O N's
Banks need to grow their mortgage books but the number of house sales is low so banks lower their interest rates to attract more business, it's simple to understand. But banks in NZ are nowhere near going bust, see the widely published recent record profits.
The banks still have roughly high 1%+ margin over wholesale funding so they can afford to lower their rates = reduce their margins to attract more business. No doubt their number crunchers have worked out the critical figure where margin will be too low and not worthwhile to attract more business and that figure is clearly below 3.95% for 1 year and below 3.95 for 2 years.

Look about right to me!
"Sellers who are motivated and willing to meet the market essentially reset price points. So even if you’re a little stubborn as a seller and want to hold onto your price, unfortunately, you are now at the mercy of others who are dropping prices to meet buyer demand....Remember 50 per cent of Sydney properties have no buyers. The other 50 per cent might have one buyer. That’s the reality.”
https://tinyurl.com/yblj7sjz

Garrh!, I agree with BigDaddy

That NZ banks lower their rates so they don't go bust?

It makes sense for banks to both lower rates to try to increase market share and it has a handy effect of reducing the number of mortgage defaults that they would otherwise have to tackle. However I don't think the bank debt recovery teams have that much influence over the team setting interest rates.

In fact I was just looking and the number of listed mortgagee sales in Auckland is half of what we've typically seen in Auckland this year.

Wow, the race is on! And those are only the carded rates.

actually, not carded/standard, but specials with special conditions. There will be no flex on going below I imagine.

c'mon ASB, show us what you got.

Whats happening to floating rates or are they subsidising these low rates

They last plunged during the GFC and have flat-lined since. I'd expect the same with the next shock - whenever that happens.

https://www.interest.co.nz/charts/interest-rates/mortgage-rates

The only thing subsidising these home loan rates apart from the poor old bank depositors are the commercial business, farming, exporters. In other words the productive parts of the economy.

Yes, can't fault that point. Shocking really that that is what capitalism has become.

Wow the drops just keep coming, thick and fast, 1 year under 4% now 2 years under 4%… amazing

Well done Mortgage belt for calling it many times before

There were times 2009 - 2016 when many commenters on here got very upset if you predicted lower and lower mortgage rates as these rates/conditions had never been experienced before. Now it seems there’s a bit more acceptance that the normal economic doctrine has changed.
Mind you the floating rates are still floating up very high!

Banks will never go broke in NZ.
They are competing for market share and need to be competitive.
Buy positively geared investment property if there is upside.

Put more simply banks are cutting rates to grab a share of a shrinking market.
Their super profits will disappear if mortgage applications continue falling.
Also bear in mind that easing prices could cause banks to default with their own debt to asset ratios.
Hence frantic efforts to lend to shore up their own asset backing.
As bank deposits are not insured it might be a good idea to pull your cash out while you can.

Olly, for those that are worried, deposit insurance is on the way. I was surprised to learn that only NZ Israel don't currently have it. Its becoming more obvious by the day that the curcumstances that warrant it will soon be upon us all; https://www.interest.co.nz/banking/96666/consultation-document-next-stag...

NZ has been "overbanked" for decades now.

Consultation means nothing until it's fact.
P.S. I am not Ollie.

BigDaddy, in the next crisis, to be labeled the odd country out would be grim. For the sake of stability, all countries need to adopt this.

Put more simply banks are cutting rates to grab a share of a shrinking market.
Their super profits will disappear if mortgage applications continue falling.
Also bear in mind that easing prices could cause banks to default with their own debt to asset ratios.
Hence frantic efforts to lend to shore up their own asset backing.
As bank deposits are not insured it might be a good idea to pull your cash out while you can.

Growing profits is probably what they’re trying to maintain. In the corporate world, each successive year must be bigger. I’m sure they’ll continue to be highly profitable but the board have a mandate for infinite growth.

Watch this 4 part series and be warned.

https://www.youtube.com/watch?v=A_Ii15DRKDA

Cheers - this is pretty meaty stuff.

In 2001 the Twin Towers terrorism meltdown.
7 years later to the day, Sept 11, 2008, Lehman Bros brings down the global financial system.
So what are the factors for the next crisis? Overinflated property prices?
Retreat of Chinese money chasing assets? Banks in trouble?
While the jobless rate keeps low, & interest rates low, then unlikely to be defaults.

Locking in 3.99% for a year sounds great, but the real pain will come after that. Fixing for 10yrs at 6.2% now will seem like pure genius in 2-3yrs from now.

...or not at all. Nobody can truly say where rates will be in 3 years time and longer. The problem is the immense break fees you'll have to pay to get out of a 10 year mortgage if you're wrong

Reality is no one can predict 2 or 3 years out but it has got easier than when I locked in for 7 years at 8.6%. It was all good for a few years then we hit record low interest rates. The chances of rates going lower now are far more remote. The advantage of fixing is you know your outgoings for that period.

I'm holding out for the 5% business overdraft rate said no one ever.