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Kiwibank launches a one year fixed mortgage 'special' of 2.99% and is the first major lender to offer a home loan rate below 3%

Kiwibank launches a one year fixed mortgage 'special' of 2.99% and is the first major lender to offer a home loan rate below 3%

State-owned bank, Kiwibank, has announced a 2.99% one-year fixed home loan "special."

This new rate will be available from Monday, May 11, 2020.

Update: On Friday morning ASB announced it too will offer 2.99% for a fixed two-year term. ASB has cut its two-year "special" by 40 basis points to 2.99%, and its 18-month "special" by 50 basis points to 3.25%. More details are inthe table below.

It is the first time Kiwibank has had a rate below 3%.

And it is important because Kiwibank is a major home loan lender, one that can effectively pressure the big four Aussie-owned banks.

Of course, it is not the first bank to go below this benchmark.

HSBC already offers rates as low as 2.95%. Heartland Bank offers a 2.89% rate. And China Construction Bank has the lowest of them all at 2.80%.

Kiwibank's move lower involves a -10 bps reduction. But it only puts them -6 bps lower than ANZ or ASB for one year, or -6 bps lower than BNZ's 18 month rate.

However, with them lower than 3%, it will put pressure on the other majors to match them, driving the effective rate lower.

All banks are reporting squeezed net interest margins (NIMs) and the Kiwibank move won't improve those - unless they continue to whittle away at term deposit rates and other savings rates. As we have noted elsewhere, that depressing of savings rates is an ongoing trend. Kiwibank might have ensured that it will continue longer and deeper. In fact, Kiwibank offers to savers are generally lower than the Aussie-owned banks.

We had expected, obviously wrongly, that the main banks would be reluctant to go below 3% for mortgage rates leaving the minnows this space for some time. But that expectation is now out the window.

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Kiwibank's 'specials' apply when you have more than 20% equity in your home. They can apply to first home buyers who can meet that standard.

Wholesale swap rates have fallen sharply in lockdown although the latest daily shifts have seen that retreat end and a kind of floor may have been found. See the charts here.

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 May 11, 2020 % % % % % % %
ANZ 3.65 3.05 3.49 3.35 3.99 4.75 4.85
ASB 3.89 3.05 3.25 2.99 3.69 3.79 3.89
4.79 3.09 3.05 3.35 3.69 3.79 3.89
Kiwibank 4.29 2.99   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 2.80   2.85 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 3.64 2.95 2.95 3.09 3.50 3.60 3.70
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

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

Fixed mortgage rates

Select chart tabs »

The '6 months %' chart will be drawn here.
The '1 year %' chart will be drawn here.
The '2 years %' chart will be drawn here.
The '3 years %' chart will be drawn here.
The '4 years %' chart will be drawn here.
The '5 years %' chart will be drawn here.

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Kiwibank can afford to take more risk because if they end up in over their heads taxpayers will bail them out. Already they have the lowest returns in the industry by most metrics:

Do you understand how crazy that line of thinking sounds?


How about interest free taxpayer funded loans to businesses?

Well the banks get free money..why not businesses?

Money's looking like an unnecessary middleman. May as well just hand out free "businesses" and houses.

Moral hazard? It's not crazy, it's entirely rational.

So moral hazard is now rational and justified?

No, but it's pretty much par for the course at this stage of the game.

How does the game play out?

Taxpayers back everything, RBNZ prints money, nothing changes and we all go back to the way we were, albeit a little bit poorer.

Somebody has been throwing a stat around here that 8% of mortgage owners hold 40% of our mortgage debt. So as a taxpayer, are you willing to use your hard earned income to bail out banks who have gambled on house prices rising with those 8%? Those 8% must own a lot of property.

I for one am not.

Neither am I. Unfortunately the entire political spectrum appears to support this course of action, so short of a revolution your only option is to leave the country. Should be some cheap flights in the future so it's not all bad.

Knightrider1 nailing it in the comment section 709 days ago:

"As we will see during the next market crash, the county cant afford to let homeowners go under due to failing house prices.
So there will be a bailout causing financial stress to non home owners "

How about the other banks that already lowered their rates?

If anything all banks have higher returns now as they still didn't pass the full OCR reduction to their clients.

Good news for existing mortgage holders, hope big 4 will follow this lead.


@Ben 72 thats the kicker here , FHB's dont stand a chance of getting a mortgage unless both of them have Government jobs and secure incomes

Yes corrected as recent mortgage holders ;)

Yes. They will need lower rates to offset the destruction of collateral underpinning their next loan rollover negotiations!
"Would you like to top up that equity, Ben, or would you like us to give you a couple of months at 2.99% to give you time to sell your property?"

Banks won't force a sale if borrowers can make repayments which should be a lot easier as rates go under 3%. See ANZ boss discuss negative equity from 7:10:

There's 'force' and then again there's 'force' !
Banks CAN do whatever they like to an indebted client. The client has no choice other than to move banks; and just try that with a property that is in negative equity or looks distressed in ANY way.
What a friendly bank says it will do on a 'promotional' TVNZ clip, and what it actually does can be two entirely different things.
One things for sure. Whatever the bank decides to do will be in THEIR interest, not the clients.

That's my point, banks won't force a sale if payments are being made, even if there is negative equity. It's not in their interest.

So it's to try to keep existing holders of large debt from sinking underwater during the recession?


Will ponzie keep going? Would be nice if the productive side of economy could get this rate.


C'mon hummy our national psyche is that of ripping each other off .

Just look and the price of milk , fuel , food , building materials ...........we gouge each other with abandon

Hi Boatman,when it comes to price of Dairy products-truth is once Fonterra pays us for our milk (approx. 75 cents a litre on current payout) then transport it,manufacture it & get it into Supermarkets & charge a margin of around 15%,you have to ask what margins are the Foodstuffs & Progressive Enterprises corporates charging.Regards.

75cents is on high side. One milksolid is about 12 litres of milk. That litre has about 4.5%fat and 3.7% protein, but that is not what you find in your bluetop bottle. The balance goes to other products. It's not the farmer that is creaming it.

Not when you have Jersey types-fat is very valuable at present,creaming it while we can, sub $6 payout for next season.Rabobank says budget on $5.60

You farmers should form a cooperative or something and get milk to the NZ market with you getting more share and NZers getting a better price. Maybe also set up an alternative store network to the large it "dairies" or such-like.

Fiat is next to worthless

The CPI and TWI suggest it is doing OK for now...

Let me know when it hits bottom

You'll know

If you think that I will gladly take yours.

Fiat is problematic, I wouldn't disagree there, but it bought my house, pays my energy, taxes, food, school fees, and shirt on my back, so while it can still be used in that way, it's not worthless. No one is turning up at Pak n Save with wheelbarrows of fiat just yet.

That's not how QE works. Instead of having to show up to the supermarket with a barrel of cash, you need an eighteen-wheel truck chock a lock with notes to buy a house or shares. In that way we are all prevented from saving our capital into the future. We are slaves to keep consuming because that's all we can afford. Fiat is indeed a very very bad investment.


This whole fiasco is getting embarrassing now. Just let this phoney system fail so we can start afresh.


We should not be fooled into a false sense of the Banks being in any way altruistic .

They know , like many do , that negative interest rates are a very strong possibility before the end of 2020 and if they do go negative it would be good to have as many borrowers as possible locked in at 2,99% on fixed mortgages .

You have been warned !

So in your opinion it would be wise to wait and see? I have 50% up for refinance end of July.

Might keep that 50% on floating rate as it's only 69 basis points above my current fix rate and see how everything pans out.

Nzdan, i suggest you keep the whole lot at floating. Aust already has rates from ANZ fixed 1,2, or 3 years at 2.19%. Wont be long before we see it here. We are stuffed and i deflation regardless of all rosy pics treasury and rbnz are painting. Negative interest rates are defintely on the cards. Cannot see rate movements anything other than downwards

ANZ AU has 2 years at 2.19% (not 1 or 3) but that is a package rate, which has an annual fee and some fish hooks. Better comparison rate is 2.54%

To add, their best TD rate is 1.35% in any term.

I take a slightly different view. If you are of the opinion that we are going to be in a declining interest rate market for the next 2 years atleast then consider fixing loans for no more than 1 year. 69 basis points is a big premium to pay. It is unlikely drops are going to be that large in the future to make up for the premium you would otherwise be paying. In other words your better to take the saving while it's on the table. Let us know what you choose to do @NZdan as it's always interesting to see different perspectives.


It amazes me that we don't see that lower interest rates are squeezing the disposable spending python at both ends.

Lower mortgage rate encourage those of limited means to plough all their disposable income into taking on housing debt - less money to spend on anything else, and,
Those relying on interest receivable from investments of many sorts ends up with - less money to spend on anything else.

How is this a winning strategy by our all knowing RBNZ? It's not like heads I win, tails you lose it's 'We all lose...".
And they wonder why "Inflation is falling! How can that be with all this 'stimulus' we've put into the economy?"

Because the numbers they use get thrown in the air and when the come down they look completely different. It's called magic.

Many say 'oh goody', but really its just another sign of the banks playing a race to the bottom thinking they're too big to fail.

Because lending growth is just filling the gap left from $15 billion+ a year in corporate profits leaving the country. Existing lending grows by $4 - $5b per quarter according to C32 (which unfortunately goes back to as far as 2015). And we're so grateful for it.

It'd be like me telling my boss i'm so happy to still have a job, he can keep my salary as profits and i'll start paying myself with my credit card. The bank keeps increasing my limit, so it's okay!

Because we don't measure things properly, and we have too many at the top who have made all their wealth simply from being born at the right time to inherit a supply of affordable housing then use poor governance to change said housing from affordable to unaffordable. When Key gave up on sound economic policy and settled for house price rises and immigration pumping that probably signaled there was little hope of real economic policy coming till things fall over.

It wasn't until 2015 that National's net migration numbers undertook the peak under the previous Labour Govt. Shamefully it has continued to the present day, despite opposition sabre-rattling and race-baiting from the then-opposition NZ First and Labour parties, who got in and did precisely nothing about it.

It's all go folks!

Indeed it is Mr Church.


I can imagine a situation in the next 6 months where we have 20-30% unemployment and A. Church telling us house prices are going up because lending rates are 2.5%.

Falling interest rates = higher house prices.

Not increased earnings and ability to service debt. Its completely bonkers. Share market the same.

... in this case it's likely to mean a stable market and not a horrible rout. A lot of people are still picking the shares to have another dip down... and have stayed out

Socialism in action

You did all read you need at least 20% equity in the house to get this rate. Funny that my prediction is a 20% house price fall so even if that happens the banks are still ok its the owners that take the hit.

House prices would need to fall 35% before we start chewing into our starting equity, even then we'd still meet the equity criteria for this rate. The joys of not overleveraging.

Those like you who aren't overleveraged will be fine.
They'll be able to stare X% property price correction and just keep paying the weekly payments. Even if they decide to sell, as long as it's their equity they are sacrificing, they will be allowed to sell by their lender.
But many, aren't you. And they will have problems of many kinds.
As I wrote above:

"Banks CAN do whatever they like to an indebted client. The client has no choice other than to move banks; and just try that with a property that is in negative equity or looks distressed in ANY way.
What a friendly bank says it will do on a 'promotional' TVNZ clip, and what it actually does can be two entirely different things.
One things for sure. Whatever the bank decides to do will be in THEIR interest, not the clients."

If you owe me a million dollars, you have a problem.
If you owe me 259 billion, I have a problem.


My grandfther born 1911 in Halmstad Sweden,never left. Never owned a house,only had ownership of one car in his life. A saab sometime in the 60s. Allways talked about driving up through Norway. Point is he had F all in his life but he was happy. Worked as a plumber. His motto: Take it easy. Only words he new in english. Died 2002.

Love this. The more people get with this thinking the better. Hopefully covid changes some people's outlooks on life and what is really important.

My old man was talking to a long haul truck driver who said after spending so much time with his kids during lock down, he's decided to give up his 70+ hour a week a job as soon as he can. He said he would rather a 9 to 5 where he can enjoy time with family rather than chase more money.

I don’t mean to be crude - but if someone spoiled themselves in Auckland then someone near would say it’s good for House Prices

Why does Kiwibank take so long to implement the rate change? Seems odd they announce Thursday but say you have to wait 4 days..... we're in the internet age where people dont wait.

If your settling on a house purchase a few days isn't a big deal. Worst case scenario if you were planning on intending on drawing down loans with ASB/KB today would be to float them until Monday.


And beware of taking up offers that look to good to be true ............. they usually turn out to be just that .

Here's why :-

1) You can be almost certain they will not be giving new loans anytime soon , they are unable to accurately value properties and will be extremely cautious approving new loans. This will not be any help to FHB's who have not deposit or unsecure income

2) They know there is a very good chance the interest rates could go to zero or negative , so interest rates could go lower , and in fact the odds are that they will.

3) The Banks would love to lock you up for a year at 2.99% ( or more ) if rates go to lower or to zero .

If I was finding things difficult I would convert my mortgage to interest only , or take a payment holiday , and definitely NOT fix

I agree that if people are struggling having at least part of the mortgage as floating rate would help them to get through the tough times.

Fixed rates are still better than floating rates so splitting the mortgage for flexibility and making use of the low interest rates is advantageous. Although I would not recommend anyone to fix for more than a year right now. Interest rates have a significant chance of dropping further in the short term. In addition data out of the US shows about -4% inflation whereas treasuries only went marginally negative. If the Fed sends interest rates to extreme negatives it will put pressure on NZ to do the same. The time risk of 6 or 12 month fixing is relatively low if there are large interest rate drops.

Sourcing money to lend in banking circles must be getting cheaper. All in the name of keeping the lending music in the musical chair game from stopping to preserve bank profits. At least Kiwi bank is putting downward pressure to stop the Aussies using us as a cash cow. Just get on with the reset already.

When are they going to pay me interest for taking a home loan ?

Saving has never seemed more pointless. The RBNZ prints 0% money for the government and the commercial banks print 3% money for everyone else. And the goals is..?..Avoiding a deflationary recession.
Why not just give the money to people who want a house? 3% is not 0% but given a little time and optimism...we should get there soon. Who knows maybe -ve % rates are not such a pipe dream. They should underpin house prices...shouldn't they?

Maybe free money for the government to throw away, but for average people without any secure job and with higher risks of getting laid off, banks would be very reluctant, especially when we are expected to see the house price fall. Perhaps, people with two or more houses can enjoy lower mortgage rates making a long term investment.

People with two or more houses are the problem. They should not be beneficiaries when future taxpayers will have to pick up the tab.

Mortgage relief to Owner-occupiers and FHBs only; possibly investors if they are buying off a plan but subject investors to a ten year brightline.

Yes I think we should be taxing the hell of any person/entity with more than one home.

As predicted...

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