A NZ-owned challenger bank bursts into contention with a 3.39% two year fixed home loan rate, plus a cash-back incentive. Other banks eye cashbacks too

A NZ-owned challenger bank bursts into contention with a 3.39% two year fixed home loan rate, plus a cash-back incentive. Other banks eye cashbacks too

A NZ-owned challenger bank has burst into contention with a 3.39% two year fixed home loan rate, plus a cash-back incentive.

For that term, 3.39% is lower than any other bank except the three Chinese-owned banks, or HSBC.

The new offer is from SBS Bank, one of New Zealand's smallest banks, with a home loan book of $3.1 bln.

Established in 1869, SBS Bank is a building society that has achieved bank registration while retaining its mutual structure. Mutual ownership means it is 100% owned by its members (customers). It has 15 branches in a national network, mobile mortgage managers and a full online banking service. Total assets of the SBS Group are $4.8 bln and that includes a range of other financial divisions including FinanceNow, Southsure and FANZ.

In addition to the new low fixed rate, they are offering cash-back within a program called the "Grate Cash Offer" for new lending. Subject to qualification, this incentive is $1,500 cash if you have qualifying lending with SBS Bank from $300,000 up to $500,000 (inclusive); or $2,500 cash if you have qualifying lending of $500,001 and above.

To qualify for SBS's 'special' rate and cash back, you need to agree to keep the loan at the Bank for at least three years or clawback may apply. Loans can only be for residential lending (including investor lending) but Welcome Home Loans and Advance Reverse Equity mortgages don't qualify.

Owner-occupier borrowers must have at least 20% equity in the property; investors may be required to have more.

Further, you will need to have your salary or primary income paid directly into a transactional account at the Bank.

If you qualify, SBS Bank will also waive their standard Loan Application Fee.

SBS Bank has also launched new branding and logo.

Cash incentives may be making a comeback. ANZ advertising now refers to "up to a $3,000 cash contribution", although details of their offer aren't available yet. We will update them when they are available

All the majors except Kiwibank made rate reductions last week. But the SBS Bank offer has trumped all of these.

With rising real estate volumes and higher house prices to chase, it is game on in both the real estate and mortgage markets.

And it is a market move up that seems to be being led by Auckland.

Banks are vying to be selected by homebuyers in this renewed activity.

Until about a week ago, wholesale swap rates had fallen to record low levels. But in the past two weeks they have started rising, with the benchmark two year swap rate up more than ten basis points in that time. They are up +20 bps at the long end although that doesn't impact the mortgage market much at all.

Our table below presents carded rates. If you have received real rate offers lower than these, please note them in the comment section below and what bank is involved. A note about related cash-backs or other incentives you received would be good too.

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 October 21, 2019 % % % % % % %
               
ANZ 3.65 3.55 3.99 3.45 3.99 4.85 4.95
ASB 4.29 3.55 3.75 3.45 3.89 4.19 4.29
4.79 3.55 4.55 3.45 3.99 3.99 3.99
Kiwibank 4.79 3.55   3.49 3.99 3.99 3.99
Westpac 4.99 3.55 4.79 3.45 3.99 4.35 4.45
               
Bank of China 3.99 3.15 3.70 3.15 3.79 4.35 4.45
Co-operative Bank 3.49 3.49 3.59 3.59 3.89 3.99 4.09
China Construction Bank 4.70 3.19   3.19 3.19 4.95 4.95
ICBC 4.29 3.18 3.18 3.18 3.20 3.99 3.99
HSBC 4.65 3.35 3.35 3.35 3.35 3.35 3.35
HSBC 4.29 3.65 3.69 3.39 3.99 4.49 4.49
  4.35 3.69 3.69 3.49 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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19 Comments

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The next headline-grabbing changes should be to the Floating Rate, to 4.5%. That costs the banks very little (how many are left on Floating?!) and makes them look like they are doing their bit for the Economy...

"That costs the banks very little (how many are left on Floating?!)"

Revolving and offset mortgages are floating.

They are! And very tax-effective they are too....But I'll suggest that many 'normal' mortgage borrowers have been encouraged to fix at some stage over the last few years by lower and lower rates, and the % of those left on floating have measurably less net debt than the aforementioned group. So, it should be less costly for banks to drop their floating rates? (For instance, I have had a Floating Rate Mortage since 2012 that's 100% Offset since drawdown. A rate change will make little difference to either me or the bank. It was my way of getting "as much as I could, when I could" because I can tell you, there is NO WAY the bank would lend me the money today)

Exactly sort of idiocy uk did in 2007

"A drowning man will clutch at a straw"

is the cash incentive what they would normally pay mortgage brokers?

It was normally a contribution to the costs of arranging or moving a mortgage (e.g. lawyer and Land Information NZ costs). Now it's just another component to factor in. When I compare banks I work out best rate plus any cashback less moving bank costs. Some banks may offer rates not as low as others but a big cashback may make them the best offer.

Cashback are especially popular with banks trying to entice you away from your existing bank. I jump banks every 2 to 3 years as the sales teams are authorised to give much better deals than the teams charged with maintaining existing customers. Average cost of moving banks is about $2,000 so if the new bank can offer a better deal I go for it.

$1500 cash back? pfffff.
Thats chicken feed on a loan of a few hundred thousand dollars. Better off focusing on negotiating hard for the best rate(s) with banks.

Throwing shiny trinkets to attract the masses. Yes, $1,500 isn't much, but it's another cost of acquisition. All banks are engaged in nudge theory. In some ways, it looks like a last thrown of the dice to take market share.

Typically any cash will come with a tie-in agreement to keep you at the bank long after your hot rate has expired. Don't do it kids!

On a $300,000 loan it's 0.5% - not to be sniffed at. Must stay with the bank for 3 years, so roughly 0.17% off the carded rate, maybe a little more if you pay down the mortgage with it and account for compound interest. You may not be in a strong negotiating position once the 2 year fixed rate is up and you need to stay 1 more year to avoid clawback though.

Doesn't matter to me if I get a lower rate or money up front, just do the maths to figure out the relative benefits. Maybe raise cashback after negotiating the rate down and try to get both?

I just got a 6k cash back on a loan of 650,000 fixed for one year at 3.48 @ ANZ. So i guess it works out the same as all the other banks.

But there was a 3 year clawback on the cash right?

Have SBS rebranded again? Think I liked their original livery best.

Every. Single. Bank offers cash back on their home loans, and usually more than $1,500.
That interest rate is great, but I bet any of the big 4 would match it if lightly pressed. Everyone knows you can get a discount on the carded rate if you have 20%+ equity.

I'm waiting to see a 2 on the front. 2.95% for a one year term would get me moving banks

Won't happen in 2019

I wonder if/when the RBNZ capital proposal comes out that we might see a bank with a 2% fixed 5 year rate, massive penalties to break, just to lock in capital. Would be a pure capital grab but would be interesting to watch the market.

Lending consumes capital, it does not generate it. Unless you mean term deposit rates and meant to post a comment on a different article... in which case, that would be true. 2% for 5 years would be about right.