ANZ, ASB, BNZ and Westpac's advertised floating, or variable, borrowing rates unmoved so far since Kiwibank's 100 basis points rate cut

ANZ, ASB, BNZ and Westpac's advertised floating, or variable, borrowing rates unmoved so far since Kiwibank's 100 basis points rate cut

Kiwibank last week cut its variable, or floating, mortgage rates by 100 basis points including home loans, business variable loans, business revolving credit, and business overdraft rates.

The move reduces Kiwibank's floating home loan rate to 3.40%, more than 100 basis points lower than the carded, or advertised, floating rates offered by ANZ, ASB, BNZ and Westpac. It also takes the floating rate nearer one and two-year fixed rates, which from some banks are as low as 2.55% and 2.65%, respectively. See all banks' advertised, or carded, home loan rates here.

Kiwibank's variable rate changes took effect for new customers on Monday, and will kick in for existing customers on June 29. Explaining the cut, Kiwibank CEO Steve Jurkovich told interest.co.nz the difference between floating and fixed rates had "felt uncomfortably large for a while."

So what of Kiwibank's big four rivals? So far none have followed by announcing cuts to their own floating rates, when often a major rate cut by one bank is followed quickly by similar moves from its rivals. Interest.co.nz thus put some questions to spokespeople for the big four. The questions and their answers are below.

ANZ

Question 1) Does ANZ plan to reduce its carded, or advertised, variable lending rates in the short-term? 

Answer: We’re constantly reviewing our home lending rates based on market conditions.

Question 2) If there's no plan to reduce them, will ANZ match the market if customers ask it to match lower rates offered by rivals?

Answer: As above.

Question 3) Does ANZ believe its current carded variable rates are justifiable and if so why?

Answer: We’re constantly reviewing our home lending rates. More than 85% of our home lending is on fixed rates and we currently offer one of the lowest home loan interest rates in the market with a competitive one-year fixed rate of 2.65%. Customers usually choose a variable loan as part of their loan structure for more flexibility to utilise and manage their lending than fixed rates offer. The interest rate differs as a result.

Question 4) Has ANZ been changing margins on business lending during the current tough economic conditions, and if so have these been increased or decreased and why?

Answer: We’re constantly reviewing our business lending rates and margins, taking into account market conditions and the current environment. We have not changed our risk based approach to margins for business lending through the Covid-19 pandemic and associated lockdown. We have, and continue to provide, a range of support measures for businesses impacted by Covid-19 and encourage customers to get in touch with ANZ to discuss their financial needs, and how ANZ can support them.

Westpac's answers

Westpac NZ understands Covid-19 has hit our customers hard, and we’ve been working to support them with competitive rates across the business. We’re constantly reviewing our pricing but have no changes to announce at this stage. We’ll continue to assess all lending applications on a case by case basis, depending on the borrower’s individual circumstances.

In March we passed on the full 0.75% OCR cut on all our variable housing rates. They make up one part of our suite of housing rates, which also includes a two-year special fixed rate of 2.69% and a three-year special rate of 2.79% which is the lowest among our main competitors. Currently 84% of our housing balances are fixed.

The rates we offer business lending customers are based on various factors including the cost of funds and the customer’s individual circumstances. We also passed the full 0.75% OCR cut to all our variable business lending rates. In most cases, wholesale rate changes have meant customer rates have reduced.

ASB

Question 1) Does ASB plan to reduce its carded, or advertised, variable lending rates in the short-term? 

Answer: ASB continually reviews our rates to ensure we are able to support our customers with their financial progress, which includes helping them into home ownership. As part of this, you will see that we recently cut some of our fixed home loan rates, so we now offer one of ASB's lowest ever fixed interest rates of 2.69% for two years. We are finding this historically low fixed rate to be extremely popular with our customers and the vast majority of customers continue to place most of their mortgage onto fixed rates. Due to commercial sensitivity, we don’t comment on any future rate change decisions.

Question 2) If there's no plan to reduce them, will ASB match the market if customers ask it to match lower rates offered by rivals?

Answer: ASB focuses on pricing the overall lending relationship which can include fixed or floating, as well as any incentives the customer may be eligible for. We work closely with each customer to ensure the best and most affordable home loan structure is achieved to meet their individual needs for today and for the future. ASB is comfortable that our home loan customers receive good value from our competitive offers.

Question 3) Does ASB believe its current carded variable rates are justifiable and if so why?

Answer: See comment above. As always, ASB supports our customers with their home ownership goals and with mortgage rates being at historic lows, we are very comfortable that our home loan customers are getting good value from our highly competitive offers.  

Question 4) Has ASB been changing margins on business lending during the current tough economic conditions, and if so have these been increased or decreased and why?

Answer: Overall business lending pricing remains in line with the prevailing market conditions. These generally follow what is happening with OCR and other market benchmarks. With the move of the OCR down 75 points on March 16, all business lending rates we reduced in line with that change. As part of ASB’s commitment to assisting business customers impacted by Covid, we also introduced a range of relief options which included heavily discounted rates for overdrafts and waiver of fees. In addition we have also participated in the Government Business Finance Guarantee scheme which also have heavily discounted rates for lending.

BNZ

We’re always reviewing our rates and while we have no changes to announce at the moment, we have market leading 18 month fixed term rate and all our classic rates are sitting below 3%. The home loan market is very competitive and we urge anyone considering their home loan options to talk to BNZ.

Our home loan pricing is based on a variety of factors, such as the OCR, the cost of funding and capital, the risk, and so on. Fixed and floating rates are different products and their different pricing reflects the different make up of those inputs. New Zealanders overwhelmingly prefer the certainty that fixed rates bring them, with around 85% of borrowers on these rates.

On business lending, we have made a variety of changes to help support our customers through Covid-19 and the recovery. Outside of the BFS (which we priced at 2.50%), we reduced business overdraft rates by 1.30% at the beginning of the lockdown and we’ve made significant cuts to the underlying base business rate, passing the benefit on to our customers. Credit margins are applied on a case by case basis and reflect customers’ individual circumstances.

The age of QE and cheap funding

To combat the economic downturn caused by COVID-19 and to assist banks, the Reserve Bank has embarked on a quantitative easing programme of up to $60 billion and cut the Official Cash Rate to just 0.25%. In its Financial Stability Report last month the Reserve Bank said:

 "During March, [bank] funding conditions in wholesale markets deteriorated. Credit spreads widened, substantially increasing the cost of banks’ access to wholesale funding. However, since February no New Zealand bank has needed to issue term funding in these markets, as the extension to the average term of their funding in recent years now allows banks to wait out the market turbulence, and only return to these markets when they have normalised."

"Banks’ stable funding positions have also been supported by strong net deposit inflows since the escalation of the crisis. This is mainly attributed to Government schemes such as the wage subsidy, but has also been supported by growth in household transaction and savings account balances," the Reserve Bank said.

Meanwhile in its annual Financial Institutions Performance Survey (FIPS) issued in February, KPMG said banks' funding costs had dropped to their lowest point in the 33-year history of the FIPS. That was to 2.59%, down 11 basis points year-on-year from the previous low recorded in a FIPS. It's the third consecutive year funding costs have dropped to a new low according to KPMG.

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19 Comments

12
up

Customers need to vote with their feet against the big 4 Aussie owned banks. Maybe then they will wake up from their 1+Billion dollar annual profits and start proactively trying to be competitive with each other..

Kiwibank offers a 0.5% discount on their floating rate to PSA members. That means PSA members could float under 3% if they're with Kiwibank. In that sense they've got the lowest floating rate by nearly 150 basis points depending on who is asking.

Here's a good answer for our Aussie bank owners....

The participation rate is down 3.2pp since January & sits at 62.85% a low last seen in late 2000. If the PR had stayed at January's high of 66.1% the unemployment rate would sit at 11.6% - arguably a truer reflection of the labour market dislocation currently occurring

Forget about interest rates. BREAKING NEWS: (From Microsoft News)

Two cops shot in Massey West Auckland at a random road stop. ONE DIES OF WOUNDS!

To the National Party: you have my and my family's and my friends' vote in the September election (we all voted NZF last election) if you go ahead with that maximum security prison that you scrapped before the last election. Promise! I would also like to see random checking for suspected gun caches in any property. I would also like to see the armed police scheme that was recently trialed reintroduced pronto!

This is a really interesting scenario. The usual course of events is the big 4's rates sit within a tight band of say 10 basis points on most terms. Given consumer perceptions of relatively homogeneous product offerings (a home loan is a home loan), how long before something gives?

Will consumers rush to kiwibank or do the other 3 look to close the gap? One thing seems pretty certain is that Kiwibank has made a stand and is unlikely to flip back on it.

Ohh the drama!

Think you might find the big four banks have common shareholders, hidden via nominee companies who are largely based in the US.

The big four are only Aussie by name and head office location. US interests; associated with the private banking cartel Federal Reserve) control some 60% plus of the stock. The Fed bailed them out during the GFC, and it perhaps explains why Jonkey (who previously worked for another US company Merrill Lynch) is sitting where he is.

Let me see. One option is for my banker to send more profit back to Aussie every year than it pays in wages. The other option is for my banker's profit to stay in NZ and move around in our economy. Yet so many people deliberately do the exact opposite of the obviously correct thing to do.

If the banks were 100% interchangeable, sure. But many people have experienced inferior service from Kiwibank and once bitten are twice shy.

For me, kiwibank's low market share is a damning indictment of their service. As you say, everyone would prefer to be there if offerings were equivalent.

I've tried three times to be a kiwibank customer and every time they have stuffed it up. Other banks experience is almost seamless.

For what it's worth, our mortgage is with Kiwibank. No problems at all, very easy to use, easy to arrange overpayments (up to 5% of loan each year) and we recently applied for another mortgage in principle, also very straight forward. Happy to do our bit to keep money in our own economy.

Same here mfd, we have only experienced good things and have been with them since very early on.

+1 Kiwibank FTW. Great service over the last 15+ years I've been with them.

Left ANZ when they charged $600+ in dis-honour fees after they failed to send me a piece of paper to sign up for my overdraft.

Would be nice if the banks actually answered the questions as posed to them. None of them genuinely answered questions 2 or 3.

Also saying "our customers prefer fixed rates" is disingenuous, when a large part of the reason customers prefer fixed rates is because they're substantially lower.

Floating rates don't win new business.

Have emailed my bank and ad use I would like a float mat h or my intention is to relocate all personal banking to KB when my fixed bit is up in 3 months. Will see if they will let high equity punters relocate.

You can use a NZ owned financial service provider, there are many only too happy to help, and they'd be grateful for your trust and support.

The official cash rate in Australia and New Zealand is the same at 0.25%

Floating rates in Aus (if >20% deposit)

NAB (BNZ) = 2.69
ANZ = 2.72
Westpac = 2.79