HSBC cuts most of its fixed Premier home loan rates, and announces its new floating rate too which it cut by 55 bps

HSBC cuts most of its fixed Premier home loan rates, and announces its new floating rate too which it cut by 55 bps

HSBC has cut its mortgage rates for its Premier product, inching two rates down to new market-leading levels.

They have also cut their floating rate.

In fact, their floating rate cut is -55 bps, five basis points more than the recent OCR cut and the largest reduction from any bank. That new floating rate becomes effective on Monday, September 9, 2016. This new level, even though it is more than the OCR cut, is still higher than the new rates of many other rivals including some major banks.

HSBC has reduced its six month fixed rate by -20 bps to 4.65%. This is not an especially competitive level.

It has cut -14 bps from its one year fixed rate taking it to 3.65%. This is a level that ANZ, BNZ, Westpac and the Cooperative Bank are already at, and above the 3.55% market leading benchmark that Kiwibank has.

It has adopted 3.69% for its eighteen month fixed rate. And at this level for this term, this is a market leading level.

It has also chosen 3.69% as its two year fixed rate. But Kiwibank and China Construction Bank already offer 3.65% for this term.

For three years however, its new 3.85% is a market leading rate.

At the same time, it has cut most of its term deposit offers, across the board. HSBC already had low offers for term deposits, so this cut takes them even lower. For six months, their new rate is 2.20% for TDs of $10,000 and greater, and 2.40% if you have $100,000 or more. For one year these two equivalent rates are the same. Even if you commit for five years, the new offers are 2.40% and 2.60% respectively. Maybe that is a signal about where TD rates might go from others too.

We are now close to the start of the Spring real estate season which will kick off in a week or two. This change from HSBC, who often set the headline rate pace, doesn't include the eye-catching headline rate we thought it might. Perhaps they have it up their sleeve, we don't know, or perhaps others will step up with that.

We suspect 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.

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 22, 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 3.69 3.69 3.75 3.75 3.99 4.19 4.29
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 4.65 3.65 3.69 3.69 3.85 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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This is good news for FHBs - in fact, for all house buyers......

Lower bank lending rates take some of the sting from the modern era of higher house prices.

But let’s have some empathy for those people - such as many seniors - who rely on income from term deposits to supplement their pensions.

TTP

Sooner or later there'll be a wider understanding that lower interest rates are not good for FHBer or all house buyers, because it signals that the underlying price of their purchase is going to fall.
At the risk of repetition - it is not 'good' to save $X per week on interest rate costs if the asset you are buying falls $2X per week, as they will. That's what lower interest rates is trying to forestall, but that will only hold for so long. Then, all these 'good' new purchases are going to look rather pricey....no matter how 'cheap' the debt is that underpins them.

Yes. That's like an inverse of the expression "Every cloud has a silver lining."

Every silver lining has a cloud?

No cloud has a silver lining?

Every lining has a silver cloud… or not?

It's also good for existing mortgage holders which represent a much larger part of borrowers than FHB's

2 Year Fixed could bottom out below 2%. If that happens, ask yourself, "Why would that happen and where will property prices be at that stage?"
The answer is unlikely to be "Because the economy is booming and property prices will be a lot higher than they are today". (NB: As we read earlier "$250 million of April 2025 NZ Government Bonds tendered today and ... the average accepted bid yield was 0.8411%". Just over 5-year money at less than 1%. Why do you think that is? Because interest rates are going higher?)
If, as I expect, mortgage rates continue to fall, it won't be good for existing mortgage holders at all. But, hey, let's wait and see!

2 Year Fixed could bottom out below 2%.

I was working for a Japanese MNC during and pre-GFC in Japan. The banks would hawk mortgages to employees for about 3.5%. And Japanese MNC employees were gold for the banks (bonuses, stability, etc).

2% would be a dream. My $1m mortgage would cost $20k a year in interest. I would be saving $440 a week compared to my current rate of 4.3%. I can't see how asset prices would drop if mortgage rates hit 2%. Money so cheap why wouldn't you take some?

The lower interest rates, the higher asset prices.

Given the space the HSBC play in - needing larger loans with more equity and not great customer service, unclear how this helps FHB's in any way. Usually HSBC price much lower... even they're running out of juice eh?

Given the space the HSBC play in

Money laundering? They used to bank a lot for the boiler room operations across Asia.