History is made with the weighted average one year fixed mortgage rate falling below 4% for the first time ever, bumped lower by Thursday's cut by TSB

Today (Thursday), TSB cut its one year fixed mortgage rate to 3.95%.

Yesterday, the Co-operative Bank turned down the opportunity to do likewise, leaving its one year rate at 4.10%.

We are still to hear of any adjustment from Kiwibank. Ironically, it started the current sub-4% trend in mid-August, but subsequently reverted from that 3.99% one year fixed rate 'special' in mid-September. We expect Kiwibank will be back soon with a current competitive offer.

The result of all this rate cutting of home loan rates is a fall in the average one year rate to 4.02% (on an unweighted basis) and 3.99% on a weighted basis (weighted by the size of each bank's mortgage book). It is this TSB reduction that has pushed the weighted average one year rate under 4% for the first time ever. There has never before been a time when the weighted average of one year fixed mortgage rates has fallen below 4%.

A month ago, the weighted average one year fixed rate was 4.18%, so the fall has been -19 basis points.

The unweighted average 18 month rate is 4.42% while the weighted rate is 4.31%.

The unweighted average two year rate is 4.20% while the weighted rate is 4.24%.

The tightening of the differences between the two measures is an indication of where the big four are pitching their 'specials' and competitive targets.

All this comes as wholesale swap rates are rising for durations to five years. The rises are small for the one year duration, up +10 bps in the past month. But they have been higher - up +25 bps - for two and three year durations. The turn up in wholesale swap rates will limit how much and how long banks will tolerate for advertised 'specials' in the mortgage market. They may last a few weeks yet as the bulge in rollovers and resets runs until mid December. After that there is less incentive or opportunity to capture outsized market share.

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 15, 2018 % % % % % % %
ANZ 4.99 3.95 4.85 4.29 4.49 5.55 5.69
ASB 4.95 3.95 4.29 4.29 4.49 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 3.95 4.15 4.29 4.49 5.29 4.99
4.50 4.10 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 3.95 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%.

Fixed mortgage rates

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I posted in another article, but my bank offered to let me break my 4.2% mortgage down to 3.95% with no break fee. Had 4-5 months left to go so very nice for me

A thousand buck on 5 months to run on a million dollar mortgage? Not much to keep your loyalty! That's what this is all about - loyalty, or to be more precise, keeping 'the good stuff' and encouraging the less so to migrate - if they can!

Who is the bank?

asb. My colleague got the same with bnz - and an 8 cent break fee!

Conspiracy theory time:
-RBNZ has requested the above from banks to lower the short term rate to get a large proportion of current mortgage debt to a new low before trying to stabilise the capital in the market and make a fundamental long term change to our growing debt issue. RBNZ to banks "we will keep OCR lower then we should for longer but within the next 3 years we will together implement XYZ to fix this market"

A man can dream...

There was a “tap on the shoulder” last year to start lending more at some banks I believe. But only general guidance from the RBNZ

It’s more representative of weak demand from the public. Hence why has come hand in hand with lower volume turnover

With 11 months to go on a 2 year fixed term, I was given a break-fee quote for $900.
To re-fix to 1 year at 3.95 saves me over 3k over the next 12 months.

Glad I checked

Implies to me that we are likely headed for far higher than the 3.95 after your 1 year term is up. No bank gives away money in the bank, so to speak.

With ASB - $175 of break fees, to save $988 interest on a circa $400k mortgage

it is possible, those who re-fixed their mortgages with no fee applied , can expect a survey-call from bank later on to how their bank-customer relationship and bank culture has been so far... etc. . As an action point for the recent Royal Commission report findings...

It's a possibility, but I doubt it.

I dont understand what is behind these very low rates. Apparently the NZ economy is booming. Unemployment at an all time low. So why are savers and first home buyers being crushed with low rates that underpin very high assett prices? Globally rates are low so theres that. But it makes little sense in a context historical interest rates.
In the teeth of the 1991 recession assett prices were far far lower unemployment was 10.5% and mortgage interest rates bottomed out at about 6.5%.

There was just way less money around. Now there is a huge surplus of money, for banks and some others at least, and assett prices are astronomical, interest rates minuscule. Go figure.

I would guess, prices went up due to speculation and now the real economy hasn't got what it takes to pay the bill on a huge amount of debt.

Is it possible that Aussie and NZ banks are borrowing very long and lending short? Speculating on internet rates resetting significantly higher in a couple of years but locking in very low long term rates for themselves?
That would seem not to be in their own best interests given it could lead to defaults and price collapses down the track. Or maybe they just dont care.

Here's my theory. They are presently re-setting and re-negotiating only short term rates (i.e., 1 yr or less for those existing customers on short term rates) - looking to capitalise on much higher rates once those short terms are over.

So, expect that as soon as all these limited time-bound 'specials' run their course (around end December) all of the 2+ year rates will go well up in January.

Floating rates might then start to look more attractive in comparison.

Banks are professional in managing term risks. The RBNZ as regulator watches these mismatch risks like a hawk and publishes data on it and core funding ratios monthly. You can also see them by bank here in the Liquidity dropdown.