The mortgage war takes interest rates down to levels never seen before for fixed home loans with Kiwibank the latest to offer a market leading rate

The mortgage war takes interest rates down to levels never seen before for fixed home loans with Kiwibank the latest to offer a market leading rate

Hard on the heals of rate cuts from its main rivals, Kiwibank has trumped them all with even lower fixed rates.

Its new one year fixed rate is now 3.55%.

It new fixed two year rate is 3.65%.

Both are market leading and the one year rate is the lowest-ever rate for a fixed term mortgage of any term.

These changes come after wholesale swap rates fell on Thursday to new records lows.

The new Kiwibank rates involve an impressive cut of -24 basis points for the one year rate and -14 bps for the new two year rate, and this positions them much lower than all their main rivals in the big Aussie banks.

Is this as low as it will go? It seems unlikely.

Will others follow or go even lower soon? Very likely, especially for the small challenger bank branches that are essentially wholesale funded.

This sinking trend still has further to go. But it would not surprise us if the majors now hold back a bit until the Spring real estate season gets into gear. The current low rates won't hurt that season's prospects.

But with Kiwibank now out there with a 3.55% rate, the others will be under pressure to match it even if they don't shift their advertised carded rates.

The next threshold, given the aggressive flattening of the curve in both the wholesale market and the retail term deposit market, is likely to be sub-4% rates all the way out to a fixed five year term.

At the same time, Kiwibank has cut all its term deposit interest rates with the reductions ranging from -10 bps to -25 bps. For the popular 6 month term the cut is -15 bps, and for one year it is -10 bps. The heaviest cuts came for the shortest terms.

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 15, 2019 % % % % % % %
ANZ 4.29 3.69 3.99 3.75 3.99 4.85 4.95
ASB 4.29 3.75 3.75 3.69 3.89 4.19 4.29
4.79 3.69 4.55 3.75 3.99 4.35 4.45
Kiwibank 4.79 3.55   3.65 3.99 4.29 4.39
Westpac 4.99 3.69 4.79 3.75 3.99 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 5.15 3.79 3.79 3.75 3.99 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
  4.55 3.85 3.89 3.79 4.05 4.45 4.55

In addition to the above table, BNZ has a unique fixed seven year rate of 5.70%.

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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Yivl... Nearly there

Indeed : )

HSBC might come in guns a' blazing with the lowest rate for spring, that seems to be their usual play.

Give it another year or two when the Asia recession really kicks in (Unless they can push Trump out of office before then). And we'll start to see mortgage rate fall even more significantly to stave off a property crash. You may see rates around 1.5% depending on your LVR (Loan to value rate).
Looking at the UK HSBC mortgage rate for a two year fix, they're currently at 1.54% if your borrowing at 80% LVR. Their best rate is 1.34% if you're borrowing at 60% LVR.

Interesting that "buy to let " has a higher rate.

Yes I have to admit that I was surprised that Kiwi and Ozzy Landlords didn't have any or very little mortgage constraints apart the the LVR for investors but that wasn't introduced to quite late in the game Oct 2015. So Landlords in the UK have to get their mortgages via a Buy to Let mortgage which is now at a higher rate than a standard residential mortgage. But before the GFC they were at a much lower rate than standard mortgages, which was very frustrating to FTB's trying to get on the property market. Now the tables have turned like the are here in favor of First time buyers.

Great picture.

Is the HSBC hovering aloft on a cloud of exhaust gas or something else, given what's happening in Honkers?

Sub 3.5% for 2 years coming up never though I'd see the day !

With bank lending rates reaching this low, people are likely to seize the opportunity - getting in before the next housing market upswing.


Remind me - do house prices normally increase or decrease during recessions?

Hi nymad,

You're being disingenuous.......

Even in recessions, house prices don't usually decrease in NZ. (And when they do decrease, it's typically by a very small percentage.)

And neither do bank lending rates usually decrease to their current level.


We've never had a housing bubble of this magnitude before!

Sure we have, housing increased at a faster rate over 2002-2007 than 2012-2017. I was there I clearly remember reading countless articles saying exactly the same as many posters here today. "house prices cannot possibly go higher it's just impossible, the crash is imminent"

Here I was thinking that that ~15% drop following 2008 was directly related to a contractionary economic environment.
So incomes don't matter, only low interest rates?


Hi Nymad,

Yes - of course oscillations occur in economic activity. And they do so continuously.

But try comparing NZIER's comprehensive business cycle database [QSBO - available since 1961] with any housing price series with which you (might be) familiar. You'll soon find that recessionary levels of activity have a very weak correlation with falling house prices.

Similarly, sharemarket indices have a weak correlation with the business cycle.

The above effects are well-known and well-documented.


Similarly, sharemarket indices have a weak correlation with the business cycle.
Interesting comment.
I'd be very interested in any evidence you have for that one. It's definitely not a mainstream view...

You'll soon find that recessionary levels of activity have a very weak correlation with falling house prices.
I don't know what you mean by recessionary levels of activity correlated with falling house prices means. No one correlates a non continuous time series.
Though, I do know that economic growth is highly correlated with house price growth, though. Through symmetry that means negative economic growth is correlated with negative house price growth.
The question of causality might be in question, but I think cointegration in levels and correlation in growth aren't really disputed..

Hi nymad,

Again, you're being disingenuous: you know exactly what I mean.


Sorry, TTP, no.
When you say you there is no relationship between stock market indices and the business cycle, I have no idea what you mean.

Yes you do - or you shouldn't bother coming here.

Sharemarket activity/indices is not a close/reliable indicator of business cycle activity and vice versa. At best, any relationship is controversial.

That's a likely reason why macroeconomic modelling and policy discussion typically assign a relatively minor role to the sharemarket in investment decisions.


Macroeconomic forecasters typically use bond and share markets in their models to forecast turning points in economic activity.

In fact, nymad, very often they don't!

Historically, this approach has been used far less frequently than you may realise.


What would you know?
State your expertise.
Because, I deal with these models pretty often and am quite familiar with the literature which is rather conclusive on the stock market being a leading indicator for economic modelling.

Dealing with theoretical models and reading literature vs actual life experience of "been there, done that"

Is the next All Black's coach going to be someone who has read all the rules of rugby really well and has modelled the psychology of team work or someone who has played and coached ruby before???

I'd say building forecast models is the 'real life experience'..

No, as usual, you are being disingenuous. See Box 1, Figure 5. Every recession in the last 100 years has coincided with periods that had falls in real house prices.

An interesting quote from the conclusion:

Financial excess reflected in overvalued asset prices, or indeed the subsequent financial fragility, often seems to be associated with some of the deeper recessions here and abroad.

Don't let facts get in the way of TTP's spruiking!!!!!!!


It pretty much goes...
Yvil: "I'm going to post the most outrageous comment today!"
HeavyG: "You ain't seen anything, yet"

TTP: "Hold my beer..."

Gotta admit, this was good haha

Yes and no.
Early 1990s and late 90s minor falls.
Post GFC - significant, but not major, fall
1970s - no nominal falls, but some real falls

Yep not much fall in interest rates post GFC due to China's global property binge that went on until 2017. The banks could get away with not caring about local investors or First Time Buyers. Now they're having to fight it out to get wage earns to invest.

We have never had 1.2 trillion in housing wealth before. The flow on effects of a small percentage fall is magnified.

After peaking in 1974 it took how many years to reach the previous high, in a period of significantly higher inflation. Maybe the RBNZ data is wrong ?

TTP your forgetting that times have changed in NZ and that there's no more foreign buyers to hold NZ property aloft out of the grips of a recession, haven't you noticed the banks rapidly dropping their mortgage rates. Humm not sure if the mortgage rates in NZ have ever been this low for customers. Apparently in the 1980's they were ridiculously high and since then they've slowly reduced, with the recent bank panic acceleration to reduce them further to help wage earner and resident investors to afford property.

Hi CJ099,

Go read today's (16th August) auction results - as reported by Greg Ninness.

There are emerging signs that the Auckland housing market is picking up.


Yes sure, there will always be dummies who think it's cheap atm. I call this financial suicide.

Why not wait till they go lower? Pretty soon they'll be paying you to take a mortgage. /s

Lean Green Jellybean. Thank you Kiwibank. ⭐

3.55% for 1 year, AWESOME!!! getting closer to the 3.49% I predicted by the end of September

Remember that the mortgage interest rate during the "great depression" in NZ was 3.75. The resulting credit crunch affected both the government and the business economy. People were out of work and couldn't pay rent so landlords chucked them out. Are we there yet?

Some poor guy I read about had a mortgage for $25000 but was only able to sell his house for $8000 - to a banker (of course).

Yes that's the downside that Landlords forget calculate for when people can't afford the rent (As a previous Landlord I've already experienced that effect during the GFC). Then you see that Landlords have to drop their rental prices especially when immigration start to reduce further.

This is the New 'Law of Diminishing Returns'...Literally.

In the current environment where interest rates are on a downside trajectory (negative yields are just a matter of time...and trending lower in the future), it is financial suicide to even think about buying property now.

The best thing for property values are reducing interest rates