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Westpac joins the fray with a market leading two year fixed rate, but doesn't reduce standard rates so the difference grows to unusual levels

Westpac joins the fray with a market leading two year fixed rate, but doesn't reduce standard rates so the difference grows to unusual levels

Westpac has joined the fray, matching ANZ's one year rate and offering the same rate for a two year fixed term.

That means Westpac now offers the lowest two year fixed rate in the current market, lower than even the Chinese banks.

Their move is part of a general shift lower in all mortgage rates.

But, unlike other banks, Westpac is not lowering its standard rates. And that means borrowers without at least 20% equity can't get these rates. This primarily affects first home buyers.

The difference between Westpac's two year 'special' and its two year standard rate is now 130 bps. In fact the difference between its one year 'special' and its one year standard rate is now 136 bps. These are unusually large variances. And if you don't have 20% equity, low equity premiums apply as well. That is, you don't qualify for 'special' rates so standard rates apply, plus you need to pay the low equity premium. Westpac's LEP add an additional interest margin of between 0.25% to 1.5% pa depending on your equity level.

Westpac's 'special' fixed rate eligibility criteria includes a minimum of 20% equity, plus salary credit to a Westpac transaction account, to be issued prior to drawdown date. These special fixed interest rates cannot be used in conjunction with any other Westpac home loan offers or discount packages, including previously negotiated offers, legal fee contributions or the Westpac Choices Home Loan with Airpoints™. These special fixed interest rates do not apply to loans for business or investment purposes.

One useful way to make sense of these new lower rates is to use our full-function mortgage calculators

And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options.

Here is the updated snapshot of the advertised lowest fixed-term rates on offer from the key retail banks at this time.

Fixed, below 80% LVR 6 mths  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at May 21, 2020 % % % % % % %
ANZ 3.65 2.79 3.05 2.95 3.35 4.45 4.55
ASB 3.89 3.05 3.25 2.99 3.69 3.79 3.89
4.79 3.05 3.05 2.99 3.39 3.49 3.59
Kiwibank 4.29 2.99   3.39 3.65 3.99 4.09
Westpac 4.79 2.79 4.25 2.79 3.39 3.49 3.59
Bank of China 3.89 2.79 2.89 2.89 3.19 3.79 3.89
China Construction Bank 4.70 2.80   2.85 3.19 3.30 3.45
Co-operative Bank 3.09 3.09 3.35 3.35 3.69 3.79 3.89
Heartland Bank   2.89   2.97 3.39    
HSBC 3.49 2.80 2.85 2.89 3.50 3.60 3.70
ICBC 4.29 3.18 3.18 3.18 3.20 3.99 3.99
SBS Bank 3.89 2.99 3.05 3.05 3.69 3.79 3.89
  3.39 2.79 2.99 2.99 3.39 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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Is this really a free market?? It’s like watching the prices at the petrol pump align? Does no one have a competitive advantage in costs? efficiencies? Systems? Processes? Customer service that they can charge more.. or is it just that when you sell newly created money or petrol you can all charge the same?

Free market is and has always been a fallacy my friend, specially in sectors such as banking where oligopolies are the norm. Doesn't take much to implicitly agree on service conditions when there are just a few players in the market.

I'm not a banker but wouldn't a highly responsive rate of movements between banks advertised rates suggest a competitively functioning market? i.e. one drops and they all quickly follow?

60 basis points between Westpac's 2 year rate and Kiwibank's, which now has the highest 2 year rate. What gives?

Need lower rates. Economy is stuffed, need something drastic to kick start. I say bring in negative rates and take these mortgage rates below 2%

surprise surprise, a leveraged up landlord wants lower rates and "thinks" that is going to kickstart the economy.

Haha why would you think im a landlord. Fyi, I sold all my rental properties 18 months ago. I am a business owner and if things carry on in this depressed manner, 20 to 30 staff could lose their jobs. This is not about houses, this is about the economy. Some of you are living under a rock if you think you will still have your jobs if things don't improve. Carnage is on its way pushed out by wage subsidy. We need drastic action early or there will be lots of unemployed people. Unless you work for the government no job is secure right now.

Why would lower interest rates kickstart the real economy? If incomes drop on average say 30% due to reduced hours/layoffs, dropping interest rates from 3% to 2% reduces a single outgoing by 9% ($500k mortgage, 20 years 3% to 2% on P&I). Still leaves a huge shortfall. If the mortgage was 50% of take home pay beforehand, and it reduces by 9%, then its a 4.5% reduction in total outgoings vs a 30% reduction in income. Thats not going to get people out and spending again, they'll still be pulling the belt tight.

Need a better solution than making housing debt cheaper (and pretty much only housing debt will be affected).

I am talking negative interest. Unprecedented times like this is not to reward savers but to get the economy pumping. The paycuts wont be 30% for most, believe me it will be 100%. I know a number of businesses planning redundancies in excess of 20% of their employees. We are facing a significant deflationary perios which is hard for people to understand and it's very negative for jobs and the economy. Like it or not, under the RBNZ's targeted inflation levels the economy does well and people have jobs.

And again, reducing the outgoings by smaller amount than the income reduction wont get people spending and the economy revived.

Are the standard rates relevant to anything except those who are re-fixing? e.g. are the banks going to extend credit to anyone who doesn't qualify for a special?

FHB with 10% deposit but secure jobs can get credit (with lack of LVR) but don't qualify for the specials.

The removal of LVR was a smokescreen by RBNZ. The limits were never challenged, since servicing a 90% loan at current prices is a stretch (remember 30yr mg, so not using current rates for servicing purposes). Higher risk = higher capital consumption = higher price. That said, Westpac seem to be rorting it.

Hmm... We bank with Westpac and am used to them being last cab off the rank. They are the worst of a bad bunch but never blotted their copybook enough for me to say Sayonara. Two fixed-term loans due for refinancing in June. Should we jump ship this time?

In my opinion rates are going to be low for some time and we may not even be at the bottom yet with RBNZ signalling potential for a negative OCR in Q2 of 2021. I am also due to refix in June and will be looking at a one year term.

Are they off the rank? No sign of these interest rates on their website as at 9:10am

I am very concerned , this fiddling with interest rates is just a distraction................ we are in BIG trouble, the chickens will start coming home on 28 June when we see how the economy has shrunk from the GST returns

We have seen nearly 5,000 people lose their jobs in major companies this week alone , that's likely to directly affect 5,000 households or +/-20,000 people .

The big ones are :-
James Hardy
Air New Zealand
Fletcher Group
Auckland City ( contract workers )

Add another 20,000 folk in hospitality , which will affect around 80,000 people .........

Consequently , the spending power of 100,000 people will be curtailed by around 1 June 2020.

Its the knock-on or domino effect that takes about 2 months thats going to be our biggest worry .

And the PM wants a new Public Holiday ..............WTF ?

It’s ok, we have had the government continually saying that they are creating job, job jobs!
They have so many in govt. that have so much business success so we will be just fine won’t we?
Would hate to be a business owner at the moment and they have had their livelihood and retirement taken away by decisions by Ardern to keep the country in lockdown far too long.
Support her as much as you want, you will learn that “the man” is right!

I recalled in your past comments that landlords around the country are creating employment. The likes of tradies, plumbers etc...?? So you don't really need Ardern's intervention. Yes..?