BNZ gives to borrowers and takes from savers

Personal Finance

BNZ drops two-year mortgage interest rate for owner-occupiers to lowest of the major banks, cuts a couple of savings rates

22nd Jul 19, 10:48am by Gareth Vaughan

BNZ has trimmed six basis points from its two-year "special" mortgage interest rate, but cut a couple of savings rates by 10 basis points.

BNZ's reducing its two-year "classic" mortgage rate for owner occupiers to 3.79% from 3.85%. Although now lower than its major rivals, the cut brings BNZ in line with HSBC's two year rate, but still trails China Construction Bank's 3.65%.

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 July 15, 2019	%	%	%	%	%	%	%

ANZ	4.49	3.85	4.19	3.85	4.05	4.85	4.95
	4.49	3.89	3.89	3.85	4.05	4.35	4.45
	4.99	3.85	4.79	3.79	4.05	4.35	4.45
	4.79	3.85		3.85	3.99	4.29	4.39
	4.99	3.85	4.79	3.85	4.05	4.35	4.45

Co-operative Bank	3.89	3.89	3.89	3.89	4.05	4.35	4.45
China Construction Bank	5.15	5.10		3.65	3.90	5.30	5.30
ICBC	4.85	3.85	3.99	3.95	3.89	4.29	4.39
	4.85	3.79	3.79	3.79	3.89	4.19	4.29
	4.99	3.85	3.85	3.85	3.99	4.49	4.49
Incl price match promise	4.85	3.85	3.99	3.79	4.05	4.35	4.45

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

Meanwhile, BNZ has lowered both its seven month term deposit rate and seven month term PIE rate by 10 basis points to 3.15%.

All carded, or advertised, term deposit rates for all financial institutions for terms of less than one year are here, and for terms of one-to-five years are here. And term PIE rates are here.

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49 Comments

by sharetrader | 22nd Jul 19, 11:09am 1563750546

it just surprises me that people still put money into term deposits, once tax is taken out you are standing still

by tothepoint - d… | 22nd Jul 19, 11:22am 1563751354

Hi sharetrader,

Some people are creatures of habit.......

It takes all sorts to make a world.

TTP

by northman46 | 22nd Jul 19, 11:30am 1563751824

Where would you recommend they put savings instead?

by lonewolfnz | 22nd Jul 19, 11:44am 1563752669

80% property, 15% gold, 5% bitcoin.

by SmoKey | 22nd Jul 19, 11:54am 1563753297

Certainly not suitable for older savers, who can't take risks with these types of investments, leave alone the hassles of managing rental property. May be Winston can work out a good scheme for Grey Power savers ?

by Gummy Bear Hero | 22nd Jul 19, 11:57am 1563753456

50 % commercial property , 50 % shares , and all the rest into Buttcoin ...

by THE MAN 2 | 22nd Jul 19, 11:55am 1563753343

Property is impossible to beat for safety and return!

by Foxglove. | 22nd Jul 19, 12:30pm 1563755400

You might well be right TM2. Recent history in NZ does not argue with your point. Far from it. But spare a thought for the elderly, infirm etc who do not have any capability at of managing a rental property, maintenance, regulations, and tenants good or bad. At their age and stage, they need their capital invested safely for a steady return and reasonably quick access in case of need. They are just trying to make do with what they have got. In Canterbury 10 pensioners have died this winter from the flu. Could it be that their depleted investment earnings have meant less home heating, less healthy diet and staying away from the doctor? Not in NZ one would hope.

by Yvil | 22nd Jul 19, 12:55pm 1563756921

True TM2, but you actually need to do something to invest in property whereas TD's do not require any work or knowledge

by Audaxes | 22nd Jul 19, 1:24pm 1563758651

TD claimants have the fortitude to forgo consumption, thus allowing borrowers time to repay interest and principal bank to their bank creditors.

by Gummy Bear Hero | 22nd Jul 19, 1:54pm 1563760492

... ha ! ... clearly you don't have gas in your house ... boom boom ...

by gordon | 23rd Jul 19, 5:52am 1563817922

Just don’t buy in Christchurch. Oversupply causing rents to drop and house prices not keeping up with inflation at best. Christchurch will continue to be the town to avoid because of its weather, isolation, poor work opportunities and propensity for earthquakes.

by redcows1 | 22nd Jul 19, 12:25pm 1563755154

Spend it. Bugger the saving, you're gonna die and can't take that figure printed on your financial statement with you.

by printer8 | 22nd Jul 19, 12:41pm 1563756066

northman46
As a retiree, I am moving my td as they mature into a KiwiSaver balanced fund (BNZ) with more exposure to equities but with some bonds etc. Getting a far better return than td and if needed sooner than expected as I am 65+, I can have money in my everyday account within 5 days with no fees (or shift to another KiiwSaver investment profile if need be) as opposed to 30 days notice for td and break fees involved.
I am concerned about slowing global economy, and effects of trade wars and Brexit etc but I am expecting cuts by FED and NZ OCR will mean that equities could hold and even continue to do OK.
My wife has become a property investor - albeit reluctantly - this past month. Yields are by historical standards are abysmal (I remember when a yield of less than 10% wasn't considered a good investment and not to be mentioned at property investors meetings) but a yield of 5.5% and capital gains (here in HB) over 5 years look a hell of a lot better than sub-3%, and most likely less, td rates over the same five year period.

by Yvil | 22nd Jul 19, 1:01pm 1563757280

P8, would you mind sharing what your balanced fund returns?
You and your wife probably already know, as a property investor, don't be "average", you make your money when you buy, if you look hard enough and you know your stuff you can quite easily buy a property for 20% under its value or improve its value by 20% in 3 months, and since you're probably only putting 20% in, you're effectively doubling your money

by printer8 | 22nd Jul 19, 2:30pm 1563762620

Hi Yvil
1. KiwiSaver
My return is a little bit more complicated than simply past and current returns.
Firstly a little background. I posted last August that I was concerned about the outlook for equities due to a variety of factors so I moved my funds into a moderate fund (but also holding some term deposits laddered six monthly). By November I felt that there were changed signals (comments about cuts in FED and NZ OCR, plus trade war talk moderating) so early in November I shift to the slightly more aggressive BNZ Balanced KiwiSaver. The NZ and global share markets did pick up soon after (which I am happy to take a screen shot of and forward to interest.co as proof) and it has generally continued to trend upwards since. I was fortunate that I avoided the fall between late Sept and November; some would say it was just luck on my side.
I had a term deposit mature in early June, but held it in my everyday account rather than transferring it immediately as the market was volatile at the time (read cr**py) but I did so in early July and missed the down turn at that time.
So my timing has been a factor in my recent return and as mentioned some would say I am lucky; but I follow interest.co for a reason - to make informed decisions.
Without going too deeply into the calculations, I have probably had a conservative 8% or 9% return since November (relating to about a conservative 12% annually). The current return for the BNZ balanced account can be got from their website; however, remember that I have had some good fortune in my movements and timing.
Historically (over the past 6 or 7 years), without checking that particular fund has been returning around 7-8%pa. after fees. The growth fund a little higher.
However, I am the first to recognise that past performance is no indicator of future performance. However, I do feel that a balanced fund such as I have (which includes equities) is likely to significantly out perform term deposits because I (i.e. personally) feel that low cash rates are likely to mean that equities are more likely to have better returns than the like of term deposits.
I have long posted that I feel KiwiSaver is an excellent investment vehicle for post 65 retirees. One is not investing in a very limited range of shares but rather at low cost tapping into the expertise of fund managers and there being no entry/exit fees and money is more readily available than most other investments I know.
I will be watching what is happening locally and internationally and if there are significant indicators which have long term implications I will be either transferring my funds into either a more conservative fund or term deposits (but the later would have to change dramatically). I don't see this as a monthly event; rather a review every six to 12 months.
2. Purchase of rental property
My wife purchased her rental property without needing a mortgage - i.e. 100% equity. Hence your doubling of 20% deposit on a property 20% below market value doesn't apply (unfortunately!!!). But you are correct; it is more important - especially for FHB - that if proce is the major concern, then the purchase price of a property vs market value is more important than market trends post property market peak.
My wife is looking to a five year term to avoid the implications of the bright line test. Over that time period her net return from return will be just over 4%pa which is going to be better than falling term deposit interest rates. I am also fairly confident that over that time period we are likely to see some capital gains, but these are not going to materialize until the property is sold. Is a capital gain likely - I am not going to debate it, but if it doesn't eventuate then she will just hold longer waiting for an significant up term which she likely to do anyway; term deposit rates or equities would have to be much higher and assured than currently.
3. Risk tolerance
It is not surprising that at my age I am reasonably risk conservative so I am not getting into Bitcoin or the likes seeking 20% with the far higher risk involved.

by Yvil | 22nd Jul 19, 2:59pm 1563764348

Thanks for your reply P8. Please be mindful that selling a property after 5 years does NOT guarantee you pay no tax on the capital gain, the "intention" to buy an asset for a capital gain is still taxable, no matter the timeframe. In you post above you have hinted that you are holding the property for 5 years in order to avoid paying tax on capital gain, be very careful with that statement!

by printer8 | 22nd Jul 19, 3:11pm 1563765078

True.

by Retired-Poppy | 22nd Jul 19, 4:44pm 1563770659

P8, yes, with capital gains largely gone and with yields as paltry as they currently are, property for investment purposes is becoming an illiquid trap. As Yvil correctly points out, it's now more of a trap under the "intent" provision. IRD knows that investors are today more like speculators when they're prepared to leverege up on an investment that provides gross sub 4% yields. Speculators seem oblivious to how much their activities are on Inland Revenues radar.

by HeavyG | 22nd Jul 19, 6:18pm 1563776326

If you are losing money you want your house to be "caught" by IRD so you can claim the loss.

by imhenry | 23rd Jul 19, 6:37am 1563820678

Bonus Bods Duh

by linklater01 | 23rd Jul 19, 4:47pm 1563857274

northman46,

If you can ignore the idiot who styles himself lonewolf,then try this; 60% in a diversified share portfolio-30 holdings with a strong bias to sustainable dividends-20% property-excluding home-15% cash and 5% misc.

of course,I am long retired,but have always favoured income producing assets. The net yield on TDs is not great and reducing,but that doesn't matter. When the bubble bursts,as it must at some point,liquidity will be king once again.

by Due Diligence | 22nd Jul 19, 11:37am 1563752228

Inflation too

by ngakonui gold | 22nd Jul 19, 11:41am 1563752505

What would happen if savers started withdrawing money until banks put interest rates up?
Consumer power surely would win out.

by SmoKey | 22nd Jul 19, 11:52am 1563753156

There has to be a safe place to park the funds withdrawn for a short term, say 6 months, so banks can know what consumer power is all about. Is there such a place ? Can RBNZ lead the way on this ?

by christlucas | 22nd Jul 19, 12:07pm 1563754040

Kenesis looks like a good place to park some cash outside the banking system and you can use it for payments as well.

https://kinesis.money/en/

Kinesis is a yield-bearing digital currency based on 1:1 allocated physical gold and silver

by Voiceofreason | 22nd Jul 19, 12:21pm 1563754890

We should remember this kind of behaviour if the banks ever get into difficulty because of their over-extended mortgage books and want to consider a bail-in...

by Yvil | 22nd Jul 19, 1:22pm 1563758563

Interesting that the 2 year is now lower than the 1 year rate. I think that hasn't happened in a very long time?

by MisterB | 22nd Jul 19, 1:46pm 1563759996

swaps have been that way for some months

by Greg-Hamilton | 22nd Jul 19, 1:27pm 1563758844

We know that we are from God, and the whole world lies in the power of the evil one. - 1 John 5:19

realized the meaning now !! :-(

by WhenwillitEnd | 22nd Jul 19, 1:33pm 1563759195

Actually, BNZ was already quietly offering 3.79 for 2 years a fortnight ago. I know because a term deposit matured and I used it to pay down a mortgage on a rental and fix the remainder. The money from the TD worked harder that way. Ah Tds, what to do? It’s all very well to suggest commercial prop, bitcoin, managed funds and other share/bond investments, but you know what, I am in my 60s and sick sick sick of all the hassle of extracting returns from my hard-earned pile. I was looking forward to no-brainer TD returns and now all that planning was for nothing! I have property and I don’t want anymore exposure to that. I’ve been in gold and physical ownership is problematic and gold certificates are ‘t satisfying, plus there’s GST. I see a slowdown ahead globally and cash is king at those times but how far off is that and how am I meant to live in the meantime apart from eating capital?

by Greg-Hamilton | 22nd Jul 19, 2:08pm 1563761310

I see a slowdown ahead globally and cash is king at those times

Accepting this theory , cash in what form will be the king ? i mean what currency is the king is another question !!

by WhenwillitEnd | 22nd Jul 19, 2:55pm 1563764106

Cash in one’s home country’s currency for daily living expenses and for purchase of firesale assets.

by Retired-Poppy | 22nd Jul 19, 4:47pm 1563770826

Well said :)

by Yvil | 22nd Jul 19, 3:08pm 1563764880

Great post WWIE, I understand your conundrum…

by MisterB | 22nd Jul 19, 1:45pm 1563759941

NZ deposit rates are MASSIVELY higher than most other countries.

This is because too many people spend their money, i.e. on the clamor for investment properties on this thread, and so NZ inc has zilch savings. Deposits are needed for lending, so artificially kept high. Those asking for lower and lower loan rates need to remember the other side to that coin.... when there are little depos in market to maintain legislated ratios, lending will slow down.

by Peri | 22nd Jul 19, 1:55pm 1563760531

Banks don't lend deposits, deposits are a by-product of lending.

by MisterB | 22nd Jul 19, 2:26pm 1563762391

missing the point...

the banks still need to maintain deposits as a ratio of lending. While credit issuance creates a matching deposit, that deposit doesn't necessarily go to or stay with the credit issuing bank

by Audaxes | 22nd Jul 19, 5:09pm 1563772164

Have you ever seen a published unbalanced bank balance sheet?

by MisterB | 22nd Jul 19, 7:04pm 1563779086

Err, that's exactly why they need to attract deposits.

I don't understand why people don't understand this simple fact. If retail deposits weren't required to fund/offset/balance lending, we wouldn't have interest rates where they are... miles above wholesale rates. #sigh.

by WhenwillitEnd | 22nd Jul 19, 2:04pm 1563761070

Yes, rates may be higher in NZ, but note that in some countries, unlike NZ, savers’ gains from interest are not taxed.

by MisterB | 22nd Jul 19, 2:30pm 1563762643

Which ones, and what are their rates?

In Australia, they also pay tax on interest earned and TDs are circa 2%

A link shared by someone on here showed Ireland 12m TDs are 0.05%; ouch

by WhenwillitEnd | 22nd Jul 19, 2:52pm 1563763959

Singapore is one such country. (sorry for the earlier double post).

by MisterB | 22nd Jul 19, 3:52pm 1563767553

Righto. That's more of a government thing than a bank thing... (and, I'd support!) but I do note their TD rates well under 2%.

by WhenwillitEnd | 22nd Jul 19, 2:05pm 1563761115

Yes, rates may be higher in NZ, but note that in some countries, unlike NZ, savers’ gains from interest are not taxed.

by SmoKey | 22nd Jul 19, 4:27pm 1563769635

Yes, we need some tax relief like that here too for savers. May be the first 10k in interest from bank deposits could be exempt from tax ?

by SmoKey | 22nd Jul 19, 4:29pm 1563769756

Kiwibank could be subsidised by the government to give more interest to savers ?

by Carlos67 | 22nd Jul 19, 9:55pm 1563789321

TD's still working for me but as my only income source I'm only paying about 11% tax on it. The government should look at stopping taking tax from your savings, it would certainly promote savings. Seriously no point in trying to save while working, your paying to much tax and your money is better spent paying down the mortgage instead.

by Gareth Vaughan | 23rd Jul 19, 1:35pm 1563845734

FYI, I've just updated this story to reflect that BNZ has reduced its seven month term deposit rate and term PIE rate by 10 basis points to 3.15%, not 3.10%. Apologies for the error.