More banks make fixed home loan rate cuts and match them with steep term deposit rate cuts and the overall level of interest rates sink lower

More banks make fixed home loan rate cuts and match them with steep term deposit rate cuts and the overall level of interest rates sink lower

Fixed mortgage rates below 3% are becoming a very real possibility.

At the moment, only Heartland Bank (who has an open trial program launched), and Simplicity (who only offer it to a limited set of first-home buyer members) have gone below 3%.

But you can sense it can't be too far away.

Two more banks have eased fixed rates lower in the past 24 hours.

First it was the Co-operative Bank. This banking minnow is in a very tough spot being solely dependent on its customer deposit base to fund its lending book.

They cut fixed rates by between -10 bps and -24 bps across the whole fixed rate card. They are the only bank recently to do that.

And they have the market leading six month fixed rate, which could well be attractive to borrowers who need to roll over now and expect rates to be much lower soon after they do that.

And now ASB has said it will match ANZ's 3.05% one year fixed rate, taking its 'special' for that term down to 3.05%. BNZ has that same low level at the longer 18 month fixed term. Kiwibank and Westpac have their one year fixed rate at 3.09%.

Westpac's reductions earlier this week were notable in that, unlike their main rivals, they didn't offer the same relief to borrowers on standard rates - and that means first home buyers especially. For example, Westpac's differential between standard and 'special' one year rates is an imposing and tough +106 bps, whereas ANZ and ASB has kept it at just +50 bps. BNZ has that differential at +66 bps, and Kiwibank has it at +75 bps.

Recent announcement by the Government that they have banker agreement to provide mortgage payment holidays for borrowers who become distressed over the loss of income/employment will only mean a suspension of the need to make payments for the agreed period. It won't extinguish any debt and it won't stop mortgage interest accruing. Details on the scheme have yet to be released, but are expected soon.

Meanwhile, while ASB and the Co-operative Bank's mortgage rate reductions were announced, the two banks also announced steep cuts to their term deposit offers as well. We will have separate detail of these changes soon.

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Wholesale swap rates have also been moving recently, but this market is somewhat chaotic at present, chopping from big falls to some sizeable rises. Overall the trend is down. But liquidity in these markets is very strained and banks abilities to actually source significant new wholesale funding is in question. Investors sense heightened risk and low rate deals will be hard to bank treasurers to stitch together.

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 March 25, 2020 % % % % % % %
ANZ 3.65 3.05 3.49 3.35 3.99 4.75 4.85
ASB 3.89 3.05 3.75 3.39 3.69 3.79 3.89
4.79 3.09 3.05 3.35 3.69 3.79 3.89
Kiwibank 4.29 3.09   3.39 3.65 3.99 4.09
Westpac 4.79 3.09 4.25 3.39 3.69 3.79 3.89
Bank of China 5.15 5.25   5.35 5.50 5.70 5.99
Co-operative Bank 3.25 3.25 3.35 3.45 3.69 3.89 3.99
China Construction Bank 4.70 3.15   3.15 3.19 3.30 3.45
Heartland Bank   2.89   2.97 3.39    
ICBC 4.29 3.18 3.18 3.18 3.20 3.99 3.99
HSBC 4.19 3.54 3.54 3.20 3.69 3.79 3.89
HSBC 4.29 3.39 3.69 3.55 3.89 4.19 4.29
  3.89 3.39 3.55 3.55 3.89 4.45 4.55
Price Match Promise   3.05 3.05 3.35 3.69 3.79 3.89

In addition to the above table, BNZ has a unique fixed seven year rate of 5.20%.

Fixed mortgage rates

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These cuts won't help most people for a while, what with most already on fixed, allowing customers to break current fixed rates without penalty would be a better way to help rather than these so called 'holidays' that don't actually cost anyone a cent.

Just talking to a colleague who said he negotiated 3.85% floating with ASB, he has quite good equity but has anyone else heard of that being done?

Sounds right Muzled, I have 3.74% floating with ANZ (includes a 0.7% discount for having sizeable business with them)

Lowering interest rates at this point in time is like putting more petrol in a car with a broken engine. Pointless.

Not entirely pointless, its a subconscious attempt to instill the fact that rates are going lower so borrow even more money and get even more in debt. its forcing peoples hand to pour even more money into the housing market to prop it up.

Haha I think there are bigger forces at play. Societies ability to service debts, and for lenders to have confidence that debts will be paid, is the worst its been in a very long time (since 1930's?).

There needs to be a change in narrative, not a change in interest rates. And the narrative I'm hearing is getting worse by the day. It may take years to change the narrative back to one of confidence in the future - only then will credit growth occur again and a recession end.

(Disclaimer: I've been listening to Robert Shillers audio book 'Narrative Economics' the last few weeks to help understand what is happening).

Well, you called it correctly Yvil. If you wish to post a cheeky brag, I'll allow it ;-)

Brag, brag, brag, lol, thanks for being a good sport Plutocracy

Although we may have disagreed on the virus response, I do appreciate your property insights (even if you're slightly on the spruikery side of the current divide!)

This does nothing for those on fixed terms for potentially years.

I think part of a stimulus package should include some relief or subsidy for break fees.

Maybe it's time for the Govt to use Kiwibank to its potential and give FHBs the chance to switch their mortgages to a special product with almost el-zilcho rates. Treating people who forked out big money to get a roof over their heads by virtue of ageing and wanting the chance to start families the same as the investors who played a big part in escalating prices over the last few years is morally indefensible.

Sorry to disappoint you but it has not been investors that have forced prices of houses up at all!
Owner occupiers and overseas buyers have been inflating the prices in Auckland.
I can honestly guarantee that there is not one property in our portfolio that I have paid true market value for!!!!!!!
professional Investors tend to buy at A discount to true value

Sorry matey, it's known factually that overseas buyers never cause that AKL prices inflation.. the stat about the overseas buyers just don't stack up.. said your fave blue party. BTW, in serious term: look after your health mentally & physically in Chch, during this lockdown.. (will be prolonged for sure).

"subsidy for break fees."
Disagree One Hundred percent this is totally onesided and self-centered

Shamino, those who fixed for years have only themselves to blame. As to those who had the common sense to fix short (which I have been advising for the last 4 years), take up the 6 month mortgage holiday, you'll be that much closer to being able to re-fix at a lower rate.

People who fix their loans take a bet. It isn't a one sided bet. These "fees", which are actually interest adjustments, are because people like my parents should keep getting their interest agreed on their long term fixed term deposits. Would they be happy to have the interest taken off them, because yields have gone down?

Also since many have followed the 1 year fixed mantra, the wait may not be as long as "years"

Got a message from an Australian bank recently. They are increasing savings account rates. With the guarantee and historically favorable exchange rate, why should I keep money in NZ?

CBA bumped up their 12 month TD rate a few days ago from 1.1% to 1.7% but that’s still lower than available NZ rates for the same term.

Macquarie, 1.35% from 0.35. I agree it's still low but I thought it was a good sign. It's one of the easier ones to set up for people in NZ. The first one I opened required proof of address. Some require residency, this one just a Passport (verified copy by Aus standards), tax numbers and a local address.


"Fixed mortgage rates below 3% are becoming a very real possibility."
Thanks banks, keep up raising the bar so to speak

"banks abilities to actually source significant new wholesale funding is in question"
Yep. Credit Squeeze headed our way.
It won't matter if mortgage rates are 3.99% or 2.99% or 0.99% if they haven't got the capacity to lend. (If you haven't taken the opportunity to 'Get it now whilst you can" I reckon - it's now too late, and the lower rates go, the tighter the Squeeze is going to be.)
Worse. As existing loans mature/rollover, there'll be a clamour in the banks' treasury departments to "Get it back in as soon as you can!"
Interesting times ahead....

I agree bw the relief is temporary and mainly psychological. The Corona virus is going to be a problem for as long as it takes to get 80% of the population immunized. Basically the government are in crowd control mode trying to appease the masses. You can only throw money at this for so long and at some point you have to cut the safety rope.

I would be interested to know if margins had narrowed further? Last year the competitiveness of the market was called out as the reason for declining profits, with the changes to the OCR it must be savaging the bottom line.

Deposit margins severely mauled I expect. OCR = 0.25%, 6 month TD = 2.70%. Ouch. 12 month loan rates only 0.35% above this -- not much spread eh.

What has been the increase in home mortgage lending of the banks since 1st January 2020 ? Compared to earlier quarters...

Yaay.. it's getting more affordable, now it's just need that 25-30 years extension? to 45-50 years, then? if possible, upon retirement age (regardless when people started their mortgage), activate the auto pilot/compulsory scheme of 'mortgage reversal' - Win, win.. even for every next level generation, all of our life is basically a borrowed time, so? before the inevitable? - Make it the norm of passing on those loan/debt numbers.. sanitise it, make it that.. 'it's just a number' .. treat it as 'infinite' after all every generations, will and can enjoy it.. numbers are irrelevant, it's only the way 'you see it' - Our job as a Nation is to prepare the next generation to see it in 'different angle' normalise, broadcast, promote it.. in the end the whole Nationhood land, country, flag, etc. - Can be the ultimate security, to those from outside NZ with more phantom numbers.. to procure us.. who knows? 50 years from now the total whole country of NZ is actually owned by young boy from Zimbabwe that out classed JK in term of Bitcoin trading. Massive & fortune for us being salvaged in that way.

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