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New Zealand's largest home loan lender follows Kiwibank quickly, matching its new two year fixed rate mortgage rate 'special', but ensuring it is lower than its other Aussie bank rivals

Personal Finance
New Zealand's largest home loan lender follows Kiwibank quickly, matching its new two year fixed rate mortgage rate 'special', but ensuring it is lower than its other Aussie bank rivals

ANZ was quick out of the blocks on Monday to match Kiwibank's recent rate cut.

It, too, has adopted a rate of 3.85% as its 'special' for two years. This is a -10 basis points drop.

And ANZ has also added a six month 'special', setting that at 4.49%.

ANZ 'specials' come with the condition that new customers open an ANZ transaction account with salary direct credited. The more normal requirement of a minimum of 20% equity also applies.

3.85% is a good rate in today's market. Kiwibank also has it and now does TSB under their price-match promise. It is a rate lower than the carded offers from ASB, BNZ and Westpac for two years fixed.

But HSBC Premier is carded at 3.79% for the same term. And China Construction Bank offers 3.65%.

ANZ's new rates apply from today. No matching term deposit or savings account rate changes were announced at the same time.

Until these reductions by Kiwibank, and now ANZ, 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%.

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 the end of this week, expiring on 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 10, 2019 % % % % % % %
               
ANZ 4.49
3.89 4.19 3.85
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 3.85
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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29 Comments

There’s still room for lending rates to fall in NZ........

TTP

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Hi TTP
I’m pretty certain that they will keep falling. First Home Buyers could do well to wait for lower house prices at the even lower interest costs ahead. We’re on our way to a zero OCR and much lower interest rates than they are today. The banks however can’t risk a deleveraging by over indebted households so each institution will need to lure more new borrowers, even if the new borrowers come at the expense of other banks loan books. They won’t want everyone though, just those with equity and it will be interesting to see when they start re-pricing the risks of the many Auckland suburbs that are in reverse (the equity destruction phase)

Remember, if new lending doesn’t exceed last years new lending then house prices fall further, but the bigger risk to the system is if people start thinking beyond the 2 year rate cycle and consider the 30 year term and actually decide to deleverage their household debt... that destruction of money on the banks ledger has a much bigger impact on the wider economy. Too big to fail? We’ll see, and bail-in could be interesting legislation (did you know the decision would fall on the government of the day rather than the RBNZ if it were ever an issue?). I’d hope that Actual Depositors are keeping a very close eye on the RBNZ financial strength dashboard over the next couple of years because there will be winners and losers here.

Final thought, the 90-day mortgage delinquencies in Oz (despite the lowest cash rate in history) have just been reported (end May) as being higher than they were in 2012?

Have you ever compared mortgage lending standards across nations? - if you do take the time to do so, you’ll understand how Australia and NZ were able to keep building their household debt bubbles and now face a Catch-22 where it’s madness to continue doing it but madness if they were to try and stop it too!

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There’s still room for lending rates to fall in NZ

Yup; especially when money is not hard-earned, its just created at-will !!! Would like to see whats the limit of money creation, which no commentators/economists seems to know untill they faces 'that situation'

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Exactly Greg.. But a very good picture to accompany the article in this instance. A colourful banker leading the uninformed lemmings on a march. Rate cuts are not a sign of strength in an economy, it’s a sign of fundamental weakness where all the risks are loaded into one basket.

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I was surprised that there were few comments in regard to the average net financial wealth per household, that Mr Chaston provided on Friday. perhaps because it was Friday afternoon ,or that the average Kiwi household is doing pretty well, and the majority of commentators are exceedingly comfortable with their current wealth. Extrapolating from the numbers, the average household that lives in rental accommodation, is in a very strong net financial position of some $ 530000, yet has decided not to change tenure.. Given such low mortgage rates why would they not ?

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I didn't see DC's article, are you saying that the average renting household has a net financial position of $530k ? It sounds very high to me although if true, that's great news. Where would this wealth be since it's not in their own house? shares? business? I just find it hard to believe, if true it would singlehandedly kill the idea that housing in NZ is unaffordable since the average renter could easily get 40% mortgage (which banks would love to lend at) and buy their own house

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Cowpat, can you please post the link to to DC's article, thanks

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https://www.interest.co.nz/news/100099/review-things-you-need-know-you-….
Or https://www.rbnz.govt.nz/statistics/c22.
There is "some" extrapolation in my numbers, although the numbers are accurate.

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Thanks Cowpat, I have read the article and link, I'm still surprised but there is an extrapolation you made which is not correct; you say: "the average household that lives in rental accommodation, is in a very strong net financial position of some $ 530000" The article states the wealth as being $406'000 per household (not $530k) but more importantly this is NOT limited to household that live in rental accommodation, it is for all households, including house owners. What it does say (and it has possibly confused you) is that the net wealth does NOT include assets such as homes or investment houses but it does include the mortgages for said, excluded homes and houses. So the true net worth, including homes and houses is even significantly higher than the $406k per household.

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Perhaps i'm missing something obvious (I only had a quick look at the dataset) but I don't see any accurate way to extrapolate net worth for renters. The figure of $530k sounds incredibly high.

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Financial net worth of $716 bln divided by 1,765,100 households = $405'666 / household (not $530k). As stated above, this is not limited to renting households only but includes all households but it does exclude all real estate assets (own homes and other houses)

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I think we are saying the same thing. The calculation will be average assets for all household types (not exclusively those who rent).

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I have put this up before, but it bears comparison http://www.finfacts.ie/biz10/WealthNationReportJuly07.pdft .

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There are 645000 households that live in rented accommodation. The RBNZ data provides both gross and net financial numbers. Although not all households renting will not have a mortgage, a very large majority will not . As the net financial position is affected by mortgage debt , about 190 Billion, if taken on face value, those renting are in stronger financial position,( about 530K on average if extrapolated ) although their net wealth when property is included is 'slightly' less than the 'average' property owner..

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Completely flawed logic. There is no way to know how the other assets (B - G) are distributed between renters/owner occupiers. You can remove mortgage debt and housing assets and try calculate averages but this assumes other assets are distributed evenly across renters/owner occupiers, which is highly unlikely.

Its slightly out of date, but actually splits net worth by household characteristics (such as owner occupier vs renter).
https://www.stats.govt.nz/information-releases/household-net-worth-stat…

From 2018 the Median / Mean net worth for each category:

Renters (Dwelling not owned by usual resident(s)) was $39,000 / $124,000
Owner occupiers (Dwelling owned or partly owned by usual resident(s) ) was $558,000 / $850,000
Tax dodgers (Dwelling held in a family trust by usual resident(s) ) was $1,014,000 / $2,035,000

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Miguel , as I stated at the outset, the numbers were extrapolated. With upmost respect my numbers were neither flawed nor illogical.The math was correct I appreciate that you could not locate inputs for my data , although it is readily available. The purpose of the post , and you could drive trucks thru the numbers was simply to point out Mr Chaston's original statement that the average net financial position of a New Zealand household is $ 405000. If my logic is completely flawed then Mr Chaston,s logic is also completely flawed..However , I do not believe Mr Chaston's logic was flawed , nor was his math.

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The RBNZ dataset from the article using doesn't have the granularity necessary to calculate the net-worth of renters. The dataset I pointed to does allow you to get this figure, albeit without the ability to drill into different wealth classes.

Mr Chaston's logic is fine, as he is only trying to calculate average net worth across all NZ'ers. It's only when you try and separate out renters vs non-renters that dataset becomes unusable.

Sorry, rereading my earlier posts I didn't intend them to come off so aggressive. My intention was just to try and point out the inaccuracies of the figures as it wasn't supportive of informed discussion/debate.

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Miguel , so your conclusion that Mr Chaston;s logic was unflawed . I do not think you appreciate why I raised the issue of distortions when using aggregated data. I am hapily floored although apparently above average .

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Cowpat
The answer is that the C22 calculation of the strength of households balance sheets is completely wrong.
I read David's article on Friday and have put in a few questions to a contact I have at the RBNZ this morning. It could be a case of people just being given numbers to plug into a spread-sheet from it's inception in 1998 and then consequently getting it wrong forever more - well since Dec 1998 anyway (see the interest.co.nz withdrawal rate calculator for B & T, which is also innacurate and posts a higher withdrawal rate in strong markets than it does in weak markets). Or alternatively it could just be fraud...

Consider a couple of things from the C22 numbers. Deposits from non bank takers have fallen significantly over the last 5 years, whilst deposits with banks have increased in line with the increase in mortgage issuance during the period. What if what is being counted as a customer deposit by the RBNZ is simply adding the 'bank created deposits' from the accounting entry to the asset side of the household ledger? That makes that look far rosier than I think is the reality

Remember the calculation shows a full data set from its inception in1998 - a short time after that 12th Nov 1999 came the repeal of glass-Stiegall.... Money creation then took over...

The House and land values are also a couple of hundred thousand higher (in the asset column) than the average selling price across the Country. Corelogic are quoted on the C22, if the the RBNZ are using that as an indices of mark to market average home values then that is also wrong and possibly overstated by a couple of hundred thousand on the asset side. Will let you know if I get a response... I think the RBNZ need more help cleaning this data up, because there is also a mismatch between loans made and transactions.... particularly in the first home sector where I don't believe the banks have been aggregating the loans that make up a mortgage.

I'll give the benefit of the doubt to incompetence for the time being because it would be worrying for the Country if it were fraud.

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Joe, I was simply raising the topic for debate. Statistics can distort , particularly average wealth and be used to provide any desired story.

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You did a good job cowpat. The statistics are bunkum.

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… and you did indeed raise a debate Cowpat, well done for that

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Yes, better detailed presentation of what I said here too, in response to your previous remarks on this matter.
Mr Orr is better than most but unfortunately he is hobbled by NZ atrociously non-granular counting methods re money flows and also the sieve that was governing (ha) inflow of funds 2012-18. Sales in Auckland (residences only) first 5m of year = 16,241. Same 5m of 2019 = 7286. Read em and weep.
LOWER than first 5m of 2008 by 2.2%. Some "market". A market means buyers and sellers and transactions. It does not mean what most writers seem bothered about which is PRICE. This obsession seems connected to need to preserve con trick (yes, as in confidence meme) of owners feeling wealthy and using house as equity for spending. As opposed to an economy growing by productivity gain. Too much emphasis on what is easy I am afraid. Just like stock market share owners currently buying 80% of share dealing in their own stock to cash out, having borrowed the cash to do so, never mind the USA economy tanking etc. Alice Through the Looking Glass. The sane feel insane for insisting sanity and facts....

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Good news for borrowers, bad news for depositors. As I commented at the time of the OCR cut (and with roughly equivalent swap rates falls), the banks will end up passing most of the lower rates because of the low number of house sales. Banks need to attract business (borrowers) and there's no better way for them than by cutting their mortgage rates. Also I see rates continuing to fall, as I said just yesterday (Zach) fix short, 3.85% will look expensive in 1 year.

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If the Aussie get their recession this year or next year (the one they had to have). We are going to cop it as well and it will be a race to the bottom!
So be prepared, it might get a bit rough..

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Charman Moa.... I think it's a race to the bottom too with each central bank hoping that another country will trigger GFC 2. Then they can say it wasn't our fault. Seriously with such low interest rates across the world and never seen before debt levels how can this situation end well?

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It'll be a mixture of Brexit, US trade sanctions, Venezuela crisis, declining economy and low exports as trigger points.
Lower interest rates will only create a false sensation to load up more debts, just like queuing up to board the ship of fools.

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and not to mention Deutsche Bank who have just be downgraded to a BBB which is 2 notes above JUNK!

https://www.ft.com/content/44662e6c-8955-11e9-a028-86cea8523dc2

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What we are not given stats for is:

Number of mortgages being written and the average amounts, + OTHER loans taken out in order to buy the property. RBNZ it seems, are not able to provide this, so risk is substantially under-stated or estimated as is sub-prime as to income multiples. It is all well and good blathering about low interest rates and affordability (as in repayments, not taking into account "events my boy", like babies being born or income depletion unemployment, trade spats, economic cycle etc) What we want to know is, compared to 6m or 12m ago, how much debt is being taken out and by what type of borrower. Stats on RBNZ do NOT tell you that. They also fail to register all those who buy without recourse to loans from banks (ie foreign buyers in Auckland esp). Then having not counted their money in the money supply figures (which went into boosting and leveraging in Auckland) they also fail to count it when it disappears, with all knock ons on multipliers in economy. All this despite the RBNZ ostensibly being v concerned about leverage and impact of illiquidity trap duding a panic.

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