ASB is first out of the blocks with a rate cut for floating home loans. A small fixed rate change as well. This is where we summarise the rate cuts from all banks

ASB is first out of the blocks with a rate cut for floating home loans. A small fixed rate change as well. This is where we summarise the rate cuts from all banks

Adrian Orr has spoken. Now the focus turns to the banks and the pass-through of the lower-interest-rate-stimulus benefit.

First out of the blocks is ASB.

They have cut their floating home loan rate by -50 basis points to 5.20%.

And they cut their two year fixed rate to 3.75%, a -4 bps reduction.

Other banks will follow and we will update this story with those changes as they come to hand.

Ahead of the announcement, wholesale swap rates were down -2 bps, taking the total drop from the last OCR cut to a massive -45 to -50 bps since the May 8 rate cut. In that time, the benchmark two year fixed mortgage rate has fallen from 3.99% to just 3.79% or -20 bps.

Here is our tracking of banks' floating mortgage rate charges, the main way the lower OCR will be reflected in our economy.

A second bank, Westpac, has now passed through 45 bps into their floating rate, but nothing for fixed rates.

Kiwibank has passed on the full -50 bps cut to its floating rate customers, but nothing for fixed rates.

BNZ has passed on the full -50 bps cut to its float rate customers too, and it has matched ASB with a -4 bps cut to its two year fixed rate.

And ANZ is the last of the majors to move, cutting the full -0.50 bps for their floating rate, but making no other changes.

See all banks' carded, or advertised, home loan rates here. They are being updated in our database as soon as we are advised.

Floating May rate change Prior rate New rate Change effective from
  %   % % % for existing clients
OCR 1.75 -0.25 1.50 1.00 -0.50 August 7, 2019
             
ANZ 5.79 -0.10 5.69 5.19 -0.50 August 26, 2019
ASB 5.80 -0.10 5.70 5.20 -0.50 August 21, 2019
5.90 -0.10 5.80 5.30 -0.50 ?
Kiwibank 5.80 -0.15 5.65 5.15 -0.50 August 26, 2019
Westpac 5.95 -0.16 5.79 5.34 -0.45 August 26, 2019
             
5.75 -0.10 5.65 5.15 -0.50 August 27, 2019
China Construction Bank 5.80 -0.30 5.50      
ICBC 5.79 -0.14 5.65      
HSBC 5.89 -0.10 5.79      
HSBC 5.89 -0.10 5.79 5.29 -0.50 September 13, 2019
5.80 -0.11 5.69      

Floating rates are not so important for residential mortgage borrowers (most have a fixed rate contract), but they are important for rural lending and other SME loans. 

ASB hasn't changed term deposit rates either.

It will be interesting to watch fixed home loan rates to see if any cut flows to these mortgages. After all, 90% of home loans are on a fixed contract.

Here is the full snapshot of the advertised fixed-term rates on offer from the key retail banks.

Fixed, below 80% LVR 6 mths  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at August 7, 2019 % % % % % % %
               
ANZ 4.49 3.85 4.19 3.79 4.05 4.85 4.95
ASB 4.49 3.85 3.89 3.75 4.05 4.35 4.45
4.99 3.85 4.79 3.75 4.05 4.35 4.45
Kiwibank 4.79 3.79   3.79 3.99 4.29 4.39
Westpac 4.99 3.85 4.79 3.79 4.05 4.35 4.45
               
Co-operative Bank 3.79 3.79 3.79 3.84 3.99 4.29 4.39
China Construction Bank 4.70 4.85   3.65 3.90 4.95 4.95
ICBC 4.85 3.85 3.99 3.95 3.89 4.29 4.39
HSBC 4.85 3.79 3.79 3.79 3.89 4.19 4.29
HSBC 4.99 3.78 3.78 3.78 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%.

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.

Fixed mortgage rates

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57 Comments

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Let's get this party started!

It's on like Donkey Kong. Forget people lining up to get their savings like in a bank run. Tkey'll be queuing to extend their lines of credit.

What an economy.

Repayments on $500K, 3.79%, 25 year term: $1191 per fortnight
Repayments on $500K, 3.75%, 25 year term: $1186 per fortnight

The RB's cut, along with the 4 basis point reduction passed on by ASB, will pump $5 per fortnight into the economy, from such a loan. Way to go, Adrian Orr and ASB!

Extra latte every 14 days

Nahhh... he wants us to borrow more and so repayments stay the same...

Good point...

A borrower currently servicing a $500K loan at 3.79% for a 25 year term, will pay the same as a $502K loan at the new 3.75% rate on a 25 year term.

Therefore, with the house as an ATM, the borrower can borrow another $2K next time rates come up for fixing. That'll help keep the Ford Ranger full of gas a wee while longer.

Just a coffee! Not even an avacado on toast... Rubbish!

The pass through will take time but last cut passed through to the 2 year fix at 80% efficiency over two months.

I float $1m in December. Currently at 4.3%. Picking 3.5% by the time I float so extra $150 week. A few more cuts before December and could get to 3.3% seeing an extra $190 a week.

Comparing the 2 year rate 1 day after cut proves nothing; the cut is for those coming off higher rates or those looking to borrow at ever decreasing rates.

Is that for a roof over your head or investments?

Both.

Please spend up. Your country needs you

That's the plan.

Slow down! I've only just fixed!

Me too. Went one year. Given the cost of 6mth and floating, there was not much option.

I went 50% 1 year and 50% 2 year, spread the risk a little bit.

When will the BNZ changes come into effect. Got some fixes coming up in the next 6 months. Seems the timing was right.

Do not fix any loans till September;
Firstly banks are unprepared for the unexpected 0.5% OCR reduction
Secondly banks will, in the first instance pass on only a small part of the OCR cut, then when spring comes they will become more interested in getting a share of the mortgage pie and they will further cut their fixed rates further.
Banks are businesses and they will, of course, keep as much of the OCR cut for themselves as they can. Proof? they are making record profit year after year

I am guessing you don't really understand that OCR and fixed rates are not directly related. swaps were coming down precisely because a rate cut was expected, the delta will surprise and bring yields down, but for how long depends on what the market expects to happen in November, which had previously expected another 0.25%; term deposit rates would need to come down a heap too in order to normalise.

Most of the cut should pass through. The last cut had an 80% pass through to the 2 year fix after 2 months.

80% of 0.25% shift is very different to 80% of 0.50% when retail TD rates are where they are.

TD rates won't be staying where they are for long;)

The 0.04% 2 year drop by ASB and BNZ is really laughable, it's actually quite rude, the OCR has come down 0.50% and the swaps have come down close to that since the last OCR cut. Make no mistake, when the banks really want more business their 2 year rate will easily be 3.49%

Are you forgetting about the RBNZ increasing capital requirements on the banks, and the fact they get most of their funding from retail depositors? If they lower TD rates more people will shift their money into riskier assets to find a return.

Personally once I'm back in NZ I'm pulling the money from a recent TD maturing out and shoving it under my mattress in the form of various currencies & precious metals, and will do the same with the next TD when it matures.

Well I made a call 12 months ago that the fed would reverse its rates tightening (I also said 12 months ago that the US will get into recession in Q3 2019)
I made a call against the trend on Monday that the OCR will be cut by 0.5%.
I'm now making a call that 2 year fixed bank rates will be at 3.49% by end of September, let's see, you can call me on it in 7 weeks

Making a call on the OCR being cut 50bp was sheer luck and your original comment sounded more facetious than anything.
Kudos on making an extremely high variance prediction, but I wouldn't get to hot headed thinking that gives you any sort of expertise.

Of course you wouldn't.
I called 3.49% for 2 years, do you have the courage to make a prediction rather than just criticising others?

what is your prediction for key 6 month TD rate?

There's no point in making arbitrary predictions based on nothing more than a gut feeling.

Not at all.
I'm just saying that forecasting is more about understanding the expected variance of the prediction, not the point forecast itself.
If you can't estimate that, your forecast is pointless as it becomes, effectively, no different to any other forecast.

Granted though - possibly a bit too heavy for a G like you to understand.

Normal nymad drivel followed by the weakest joke ever... SMH

Google translate:
"Nope. Cannot understand, so will berate."

Hi Yvil,

yes, well done on cuts and reversal calls.
However, due to fear in minds of mass of consumers (just inserted by powers that be) I do not think the efforts to revive spending will work this time.
People can smell panic and this is it.
Pretty soon Central Banks will be reducing amount people can take out of bank.

They passed almost all of the cut through on the floating rate though, to which the OCR is more aligned. On fixed rates you have to look closer at the swaps.

It would be unexpected to see the full pass through on day 1. 0.04% is just the opening cut. The last cut was passed on over a two month period with 80% total pass through to the 2 year.

Wholesale rates are a LEAD indicator... they price the next cut in. So the changes over the last two months (which, looking at ANZ rate has actually only been circa 0.16% or 64% of cut in 2 year from 3.95% on 1 June to 3.79% now) was a factor of expectations of future cuts.

It's true swaps will have dropped 0.15%-0.20% today on shock value, but the key will be what happens to these in the next week as they consider likely outcome for November

A bag of peanuts. Did you get yours too?

it will soon be time to bury the money in the ground or just give it away

Negative interest rates soon. It will cost you to keep your money in the banks. The obvious answer is to take your money out of the banks but the governments across the world are now bringing in laws to stop cash transactions. Initially these are for anything above 5000 but pretty soon it will be for any transaction. This forces you to keep you money in the bank. They will win and keep your money in the bank at your expense. To rub salt in the wound when the inevitable GFCx2.0 happens they will initiate the bail in policy recently passed in parliament so they can use your money to prop up the bank. John Key has caused this damage and will be the last man standing, surfing on your money back to the beach while you are sinking in the swell with the rest of us. Sell everything now and stop spending.

Sales of safes up in the meantime, perhaps.

That cut size is negligible for borrowers. Don't worry though, savers will most likely bear the brunt of this and ASB will probably proceed to cut term deposit interest by 0.25-0.4% to compensate. Good work RBNZ.

Geniuses aren't they

With the cash rate now the same as Australia (1.00%) it's even clearer how uncompetitive the variable rate market is in New Zealand.

For example, this article refers to ASB and their 5.20% variable rate. Their parent company, CBA, is offering a 3.45% variable rate for new borrowings with <70% LVR, or 4.33% standard variable rate. That's 87-175bps cheaper than ASB. Which roughly over the life of a $500k 25year mortgage can mean $75k-$147k in extra interest payments.

500k 25y 5.20% fortnightly, total: $893,945
500k 25y 4.33% fortnightly, total: $818,900
500k 25y 3.45% fortnightly, total: $746,555

A New Zealand bank like Kiwibank should lead the way in slashing the variable rate. Banks like ASB shouldn't be making 420bps over the cash rate in NZ when back home in Aus they only make 245-333bps.

In the UK, floating was around 75bps above base rate, compared with the 420bps here.

But the UK don’t have TonyAlexander and Ashley Church!

In Australia, the leading term deposit rate is like 1.7% v 3.2% here. The dynamics are different in a country where attracting deposits is difficult and expensive.

High variable rates are to herd borrowers into fixed terms to stop mortgage hopping. Banks probably won't change now.

That doesn't sound like a competitive market to me. Looks like collusion @comcom

Even central bankers cant resist the psychological power of a good trend.

Is anyone in NZ questioning the power of the central banks?
A strange decision, insolvencies are apparently at a record low since 2008. GDP is not flatlining, yet. househild Credit growth data is down a bit but we’re still ticking over at a healthy lick of more household debt of 6.1%.... and yet -a desperate decision y the RBNZ ‘Today’. I’ll be really interested to hear what Joe Wilkes has to say on Digital Finance Analytics about this ‘knee jerk’ rate cut.

Premature ratecutulation

Fear this time. Confidence merchants have now changed their tune.
Do not expect interest cuts to reverse mass human psychology. People now been told officially that authorities are worried. Reversal of their usual tone that all is rosy in the garden. Forces of reversal are too big this time and Trump and Xi are entrenched . pretty soon Xi is going to move on Honk Kong and all illusions and tongue-holding by Western elites will be found out. Time to choose a side

ASB term deposits down to 3.00% but as long as my money is safe in the bank I'm not to worried about the low rates with the pending storm thats coming. The other option is pull most of it and buy a house with cash. Nice position to be in but its still a worry. What should I do ? not interested in gold or shares or bitcoin. Currently all my eggs are in one basket, probably not ideal unless the housing market crashes and thats not going to happen any time soon, if ever.

House prices will crash in a couple months and interest rates are soon going to be negative meaning you will pay the bank to store your money. GFCx2.0 is real.

nice problem to have

why aren't ANZ moving on their 1-2 yr fixed term rates when ASB and BNZ have already?