Another key fixed home loan rate cut is announced that takes rates down further. This reduction targets the sticky fixed 2 year rate

Another key fixed home loan rate cut is announced that takes rates down further. This reduction targets the sticky fixed 2 year rate
Source: Wikimedia Commons, by Vicente Villamón

Kiwibank has announced a 3.85% two year fixed rate 'special'.

This is the lowest two year rate on offer by any major bank and is only bested by China Construction Bank's two year 'special of 3.65%, and HSBC's Premier 'special' of 3.79%.

Kiwibank's new two year level, involving a -14 bps reduction, continues the steady drift lower for fixed term rates and their move will see competitor matching in all likelihood.

The State-owned bank now has both its one year and two year fixed rate 'special' offers pitched at 3.85%. Their 'specials' only require you have at least 20% equity. And unlike most of their rivals, they don't actually require you to shift your salary crediting to one of their accounts or require you to commit to other products.

Today's change is effective on Monday, June 10, 2019. Kiwibank did not announce a matching term deposit rate cut, but they are still offering savers 3.25% or 3.20% for the popular six, nine and twelve month TD terms.

The two year fixed rate has been one that has not been cut as aggressively as most other terms. Two months ago, the average bank two year rate was 3.97%. Today that average is 3.93%, a drop overall of only -4 bps. That contrasts with the one year fixed rate which has fallen -13 bps from 4.04% to 3.91%. The three year average fixed rate has fallen -35 bps from 4.35% to 4.00%. And the five year fixed average is down -45 bps from 4.94% to 4.49%.

Today's move by Kiwibank ends a week with little mortgage rate action.

Since the beginning of May, wholesale swap rates have fallen more than -25 bps to record all-time lows. Since the beginning of June, the reduction has been -5 bps. Wholesale markets are keying off what they think Adrian Orr thinks.

Over the past two months, a combination of wholesale rate falls and matching term deposit rate cuts has allowed banks to reduce home loan rates while maintaining their net interest margin.

And don't forget that TSB is offering "a cash contribution of up to 0.50% of the total loan amount, up to a maximum of $4,000" until June 15. There are conditions of course, but many borrowers should be able to meet those. TSB does not price-match Kiwibank offers.

See all banks' carded, or advertised, home loan interest rates here.

Here is the full snapshot of the advertised 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 8, 2019 % % % % % % %
ANZ 4.99 3.89 4.19 3.95 4.05 4.85 4.95
ASB 4.95 3.95 4.19 3.89 4.05 4.35 4.45
4.99 3.89 4.79 3.95 3.89 4.35 4.45
Kiwibank 4.99 3.85   3.85 4.09 4.29 4.39
Westpac 4.99 3.89 4.09 3.95 4.05 4.35 4.45
Co-operative Bank 3.95 3.95 3.99 3.99 4.05 4.35 4.45
China Construction Bank 5.15 5.10   3.65 3.90 5.30 5.30
ICBC 4.85 3.99 4.19 3.99 4.49 4.29 4.39
HSBC 4.85 3.79 3.79 3.79 3.89 4.19 4.29
HSBC 4.99 3.89 3.89 3.99 3.99 4.49 4.49
 with price match promise 4.85 3.89 4.09 3.89 3.89 4.35 4.45

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

Fixed mortgage rates

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Great photo.

My word, the taste of all this cheap credit is delectable.......

See you at the Maserati dealership, old chap......


In the morning you will wake up and it will still be a Hillman Hunter. Oh well ol' chap, better luck next time.

Are you not happy for others success?

Never expected to see rates this low in NZ. Makes you wonder where the bottom is. And whether the RBNZ could possibly cause rates to drop more if they had to.

There is no bottom. You can reduce rates by the same percentage a trillion times and never reach zero.

And neither is it impossible for interest rates to go sub-zero........

History provides us with numerous examples.


Your mortgage interest rate will never go sub zero. Name one place that has?

Featured snippet from the web
In 2009 and 2010, Sweden and, in 2012, Denmark used negative interest rates to stem hot money flows into their economies. In 2014, the European Central Bank (ECB) instituted a negative interest rate that only applied to bank deposits intended to prevent the Eurozone from falling into a deflationary spiral.

So you don't know the difference between interest rates and Mortgage rates? Back to the web for some more reading Whyvil.

Negative lending rates have been used abroad to stimulate investment.

And there's no law against it in New Zealand!


Nonsense TTP. Deposit rates may go below zero, but borrowing (ie mortgage) rates can never reach zero otherwise asset prices would become infinite. My original point was that there's no mathematical limit to the number of times **mortgage** rates can be reduced. Changes should be specified in percentage terms. If the old borrowing rate was say 4.25% and the new rate is say 3.85%. Then the difference value of 0.4% meaningless. It's the percentage reduction, 9.41% using this example, that matters because that how much your yearly interest payments are reduced by.

Fix for 1 year folks, rates will keep going down

With RBNZ capital proposals, you might find mortgage rates going up within 12 months even if curve continues to come off. I would take this advice with caution, timing the increases could be costly

What do you think would be better right now, 3.89% for one year or 3.95% for three years?

I’d go for 3.95% for three year - a bit on the safe side.

But rates could remain low for years yet.


[ Unnecessarily personal. Please debate the issue. Ed ]

Zach, definitely 1 year, no doubt. Firstly I strongly believe rates will be lower in 1 year
Secondly it gives you more flexibility than being locked in for 3 years.

Look at it this way Zach:
A) rates go down over the next 3 years, you're better off with 1 yr as you can lock in cheaper rates each year
B) rates go up over the next 3 years, you have a nasty surprise when you renew in 3 years time. If you go with 1 year you can fix long in 1 year

The logic is astounding. "A nasty surprise" Why would it be a surprise?

"Surprise" definition: an unexpected event.
Since I stated I expect rates to drop, if they were to rise it would be a surprise. Sounds logical to me, wouldn't you agree?

No I wouldn't agree, you have three years to watch the rates. Chance of a surprise = 0.

Im not surprised, lol (that you don't agree), you wouldn't agree if I stated that water is wet

Is that it?

3.95% for 3 years doesn't even appear in the table above - in fact you can get 3.89% for 1 year OR 3 years.

Yeah I know, it's just that I fixed for three years at 3.95% a couple of months ago. Obviously the answer would be it's better to fix for three at 3.89%. So the question should be one or three years at 3.89%?

@Yvil. I agree. A prime example as to why children shouldn’t play with matches.