Surprise! For the first time ever we are now not paying more than the Aussies for one key fixed rate. We look at how New Zealand mortgage pricing compares with what Aussies pay for the same sort of loans

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It has been a year since we last compared our mortgage interest rates with those in Australia.

And for the first time in our memory, pricing is lower for one key rate in New Zealand than the equivalent in Australia.

And this comes at a time when wholesale rates are trending higher.

Here is the current comparison:

Residential mortgage interest rates
November 19, 2018 Floating 1 year 2 years 3 years 4 years 5 years
New Zealand % % % % % %
   ANZ 5.79 3.95 4.29 4.49 5.55 5.69
   ASB 5.80 3.95 4.29 4.49 4.95 5.09
   BNZ 5.90 4.15 3.99 4.49 5.19 5.39
   HSBC 5.89 3.85 4.19 4.69 4.99 5.29
   Kiwibank 5.80 4.05 4.29 4.49 4.99 5.09
   Westpac 5.95 3.95 4.29 4.49 5.29 4.99
NZ average 5.86 3.98 4.22 4.52 5.16 5.26
   Swap rates 2.00* 2.05 2.18 2.32 2.45 2.57
   margin to swap +3.86 +1.93 +2.04 +2.20 +2.71 +2.69
   ANZ 5.36 4.24 3.94 4.14 4.64 4.34
   CBA (ASB's parent) 5.45 4.04 3.94 4.04 4.34 4.54
   NAB (BNZ's parent) 5.24 3.99 3.89 4.09 4.24 4.34
   HSBC 5.33 3.70 3.75 3.95 4.15 4.19
   Suncorp 3.99 3.94 3.94 3.94   3.34
   Westpac 5.38 4.29 4.09 4.09 4.49 4.29
AU average 5.13 4.03 3.93 4.04 4.37 4.17
   Swap rates/BBSW 1.94* 1.98 2.10 2.19 2.45 2.54
   margin to swap +3.19 +2.05 +21.83 +1.85 +1.92 +1.63
   * 90 day bank bill rate          
differential (NZ-AU) +0.67 -0.12 +0.21 +0.35 +0.79 +1.05
differential in Nov-17 +0.89 +0.55 +0.64 +0.90 +1.33 +1.39
differential in Jan-17 +0.28 +0.13 +0.59 +0.86 +0.89 +0.94
differential in Aug-15 +0.69 +0.26 +0.16 +0.56 +0.78 +0.83
differential in Feb-15 +1.02 +1.06 +0.92 +1.00 +1.01 +1.11

These are the carded rate differentials - negotiation can lower your actual rates, and your effective costs will be affected by incentives and fees. (Home loan fees are more pervasive in Australia, so much so that they require banks to declare "comparison rates". The above table does not account for those costs. Also, a wider range of carded discounts are available in Australia, but only if you commit to specific product bundles. We have ignored those sometimes costly bundles too.)

In the time since we last explored these comparatives, margins to swap have moved very much in favour of New Zealand borrowers. In fact, not only have New Zealand borrowers gained in relation to Australia, they have also gained as banks have lowered their margins-to-swap.

November 19, 2018 Floating 1 year 2 years 3 years 4 years 5 years
  % % % % % %
NZ margin to swap +3.86 +1.93 +2.04 +2.20 +2.71 +2.69
AU margin to swap +3.19 +2.05 +1.83 +1.85 +1.92 +1.63
and this compares with the levels in November 2017 as follows ...
NZ margin to swap +3.93 +2.51 +2.42 +2.59 +3.14 +3.08
AU margin to swap +3.28 +2.21 +2.08 +2.03 +2.05 +1.98

Somewhat surprisingly, the popular one year term is priced more competitively in New Zealand than Australia. This is the first time we have noticed this phenomena of pricing being better on this side of the ditch for any duration. Two year rates have tightened as well, all the more surprising because wholesale rates have ben rising in the past month.

New Zealand fixed two and three year rates have also fallen, dipping to the lowest premium to Australia in a long time.

We used to pay a +50 bps premium as a 'New Zealand-small-market' penalty. That has now reduced to under +40 bps for 3 years, +20 bps for two years, and is a discount for one year. It is the best situation for New Zealand borrowers ever. And the fat margins we revealed a year ago seem to have been reduced under the pressure of intense and genuine competition.

You can find our previous November 2017 review here.

In New Zealand there are about nine or ten active banks seeking mortgage business, but 96% of all business is being done by just five of them. And one of them, Kiwibank, struggles to post competitive profit results. The market share of the four Aussie-owned banks makes them unassailable.

There are far more options in Australia with well over 25 institutions with a home loan book over AU$1 bln, and the four majors with 'only' an 83% market share. But the sheer scale means that the 17% not with the four pillar banks is a market of AU$275 bln, itself larger than the whole New Zealand home loan market.

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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Very good.

David, Ashley Church has resigned from PINZ - you should get him to do a guest article on the current state and future of New Zealand’s property market. I predict record ad revenue and over 200 posts in the comments section. And of course, some very upset doom and gloomers, but that’s ok.

Where did you hear that?

PINZ newsletter

Has this happened over the weekend?

No, was announced 5 November. He’s still CEO until 1 Feb. He has been in the role for four years, so probably after something new.

Maybe decided it's time to jump ship.. that 'stay flat' prediction is looking a bit shaky. just went on to up over 14,300 listings for Auckland now and first two houses that came up as the latest listings were both mortgagee sales.

That's why rates are being dropped by the banks!

That won’t be it. His predictions have been spot on so far. Don’t want to start an argument, but as far as predictions go, yours have yet to eventuate (please don’t reply that something or other is happening in Australia or China, I’ve heard it ad nauseam). Keen to hear his perspective in guest article.

So would I.

Good stuff, glad you’re keen to hear a diverse range of perspectives.

there were a coule of mortgagee auctions scheduled for B&T the other day too, one got oulled, i think the other one happened.

One thing i am finding is lots of what appear to be development plans getting abandonned, and the properties sold. Three adjacent properties on May Road in mt roskill, and several other large sites being sold, with note about resource consents already being granted for X houses etc. And just stumbled across this one:

Looks like developers are starting to get cold feet and just want out of the current market.

The Australian two year rates look much better than ours though.

For those that want to understand how banks and central banks create money out of nothing that they then lend to make 'interest' then it's worth a watch of 'The Creature from Jekyl Island'

Dire Straights wrote a song about the banks: Money fo' Nothing

Floating rates in NZ are still high.

Could it be because of the cost of shipping sacks and sacks of money across the Tassie is quite costly that our rates are higher than theirs, then of course someone has to pay for the cost of shipping the profit back again. Could be that, eh?

Have we really got any cheaper rates ? The media covered the current special rates very badly, there is a load of special conditions with them like its for a new mortgage only so the special rates are misleading.

Not sure who you bank with, but some of them have virtually no conditions outside of equity while others need extra products, new money etc. I think DC did an article on it once.

NZ v Australia mortgage rates

Ireland v New Zealand property and macroeconomic comparisons from DFA

rates in NZ are still very high compared to 'normal' globally.
combined with high prices is resulting in high payments.

AUS and NZ banks are most profitable in the world - no wonder why

Is it possible to get a 30 year fixed mortgage in NZ and, if so, how much more is that rate?
There is a real sub-prime element to a low interest policy when borrowers come off short-term fixed mortgages to find rates have significantly increased. Basically, it means you can't ever normalise interest rates because you'd make mortgages unaffordable for a lot of people.

Why is there such a large difference (over 1%) in the 5 year fixed rate, anyone knows?