In a falling mortgage rate market, a major lender shifts a key rate higher, putting it back in the middle of the pack

In a falling mortgage rate market, a major lender shifts a key rate higher, putting it back in the middle of the pack

In the current environment, you wouldn't expect a mortgage rate to rise.

But that is what Kiwibank has announced.

It has upped its two year 'special' by +4 bps from 3.85% to 3.89%.

And it is not as though it is just reducing a competitive advantage. In fact, both ANZ and ASB now have lower two year fixed rates than Kiwibank.

Kiwibank still has a 3.85% offer for a one year term; that remains unchanged.

Wholesale swap rates are still falling. In fact, the two year swap rate is down to just 1.29% and that is a record low. Since the start of June, the wholesale two year swap rate has fallen -19 bps. Since the beginning of May it has fallen -38 bps.

In contrast, main bank two year fixed home loan rates have fallen just -7 bps on average since the beginning of June and -11 bps on average since the beginning of May. Kiwibank's two year fixed rate offer has fallen -10 bps and -10 bps respectively.

Perhaps this us understandable and reconciled by the limited reductions banks have applied to their term deposit rates. Since the beginning of June, these TD rates have fallen only -3 bps; since the beginning of May they are down only -11 bps. This means that as bank funding is substantially retail deposit driven and they have't cut these rates much at all in response to the RBNZ -25 bps official rate cut, it isn't surprising that key fixed mortgage rates have only fallen about -10 bps.

However, none of that explains why Kiwibank has raised its two year fixed rate, even by a small +4 bps amount.

No doubt 'market reactions' (that is, the collective response by home loan borrowers) will determine if this small rise will stick. Kiwibank's 3.89% is higher than that offered for the same term by ANZ, ASB, China Construction Bank, HSBC Premier, and TSB, but  lower than offers by BNZ, Westpac, the Co-op Bank, ICBC, and SBS Bank. Kiwibank is back in the middle of the back for a two year term.

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 24, 2019 % % % % % % %
               
ANZ 4.49 3.89 4.19 3.85 4.05 4.85 4.95
ASB 4.49 3.89 3.89 3.85 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   3.89 4.09 4.29 4.39
Westpac 4.99 3.89 4.09 3.95 4.05 4.35 4.45
               
Co-operative Bank 3.89 3.89 3.89 3.95 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 4.49 3.89 3.89 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

Select chart tabs »

The '6 months %' chart will be drawn here.
Loading...
fixed rate 
floating rate
unweighted
The '1 year %' chart will be drawn here.
Loading...
fixed rate 
floating rate
unweighted
The '2 years %' chart will be drawn here.
Loading...
fixed rate 
floating rate
unweighted
The '3 years %' chart will be drawn here.
Loading...
fixed rate 
floating rate
unweighted
The '4 years %' chart will be drawn here.
Loading...
fixed rate 
floating rate
unweighted
The '5 years %' chart will be drawn here.
Loading...
fixed rate 
floating rate
unweighted

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?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

7 Comments

Comment Filter

Highlight new comments in the last hr(s).

Oh dear, is this the first crack in the property bulls' thesis that rates are going to keep falling to prop up house prices?

Actually, it seems like interest.co.nz forgot it was a special with an advertised end date. Which came. As did BNZ 3.89% for 3 years that also went up over the weekend. Its the nature of specials with end dates.

TSB advertised 2 year rate is 3.99 not 3.85. Although they have a rate match, it only applies to new customers and at least 100k new lending... unlike everyone elses rates. Furthermore, you have to ask for it, which is no different to any other practice most banks employ. If you dont ask, or if you are an existing TSB customer not looking to top up your loan, you get their standard rates. Seems unfair.

That does change the narrative a bit indeed. Was the rate before the advertised special the same as what it has returned to? Or has it returned to a lower rate than before the special? (seems like a fairly weak special if it was only a 4 bps reduction)

NEWSFLASH: A special rate with an advertised end date...ends...on that date. HEADLINE NEWS!!!

Does noone like the CCB 3.65% 2yrs advertised rate? Never seems to get a mention in the comments.

I think no one likes CCB.

The whole world believes in central banks ability to manage interest rates. The whole world is vulnerable to a systemic failure in the belief.