A large challenger bank trims home loan rates to near market-leading levels, the first to do so after the RBNZ MPS and the first to line up for the Spring real estate selling season race

A large challenger bank trims home loan rates to near market-leading levels, the first to do so after the RBNZ MPS and the first to line up for the Spring real estate selling season race

TSB has cut mortgage rates, the first bank to do so in August. And their cuts are notable.

Their new fixed one year 'special' rate is 2.49% and that is only bested by HSBC's Premier rate of 2.45%. No other bank, and certainly no main bank, matches TSB at this level. It is now enough not to even need you to ask for their Price Match Promise.

TSB's new eighteen month fixed 'special' rate is 2.65%, and while both HSBC Premier and ICBC have a lower rate for this term, they are the next lowest, even if ANZ, ASB, Bank of China and BNZ all have the same rate for this term.

However, TSB has pitched their two year rate at the same 2.65%, which beats all others except Bank of China, China Construction Bank, ICBC and HSBC. For many borrowers TSB will seem a natural low-cost choice for a two year fixed term at one of the most competitive levels in the market.

To get rates this low, TSB has had to trim its term deposit rates by between -10 and -20 basis points at the same time.

And wholesale rates, which give the majors opportunities and pressure the challengers, have fallen recently to near record low levels.

It has been almost a month since we had the previous bank cuts to mortgage rates, and it is somewhat surprising that it is TSB that has moved first after the Reserve Bank's Monetary Policy Statement.

With the country in a new higher level of COVID-19 prevention status, all banks are restricting face-to-face contact. TSB like many others has a virtual branch option so clients can meet, discuss and negotiate with a banker in a Zoom-like environment. It's a trend some brokers may be struggling to catch up on. In the end, it is likely to be universal however, even with brokers.

This move lower undoubtedly won't be the last. As term deposit rates are pushed lower with no obvious push-back from savers, banks still have options to play the low-rate-offer card. We may be facing a scramble for transactions and market share given the uncertainties, and don't forget we are within spitting distance of the start of the Spring real estate season starting.

But in this new and uncertain world, who knows what will happen?

One useful way to make sense of these new lower home loan 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 lowest advertised fixed-term mortgage 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 August 18, 2020 % % % % % % %
               
ANZ 3.55 2.55 2.65 2.69 2.79 4.15 4.25
ASB 3.39 2.55 2.65 2.69 2.79 3.09 3.19
4.29 2.55 2.65 2.69 2.79 2.99 2.99
Kiwibank 3.55 2.55   2.79 2.79 3.09 3.19
Westpac 4.79 2.55 4.25 2.69 2.79 2.99 2.99
               
Bank of China  3.45 2.55 2.65 2.65 2.75 2.85 2.95
China Construction Bank 4.70 2.65 2.65 2.65 2.80 2.89 2.99
Co-operative Bank 2.55 2.55 2.69 2.69 2.79 2.99 3.19
Heartland Bank   2.89   2.97 3.39    
HSBC 2.79 2.45 2.55 2.60 2.65 2.79 2.89
ICBC  2.95 2.55 2.60 2.65 2.79 2.89 2.99
 SBS Bank 3.39 2.55 2.69 2.69 2.75 3.09 3.19
 [incl Price Match Promise]  2.89 2.49 2.65 2.65 2.79 2.99 2.99

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

Fixed mortgage rates

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8 Comments

TSB a wonderful bank
They make the bigger Australian banks look very average.

2.49% . . 12 months ago 3.5% was looking like it surely wouldn’t go too much lower.
Given Orr’s recent comments on possibility of negative OCR it may well still go lower. Fixing no more than one year looks good bet but 2.65% also looks a bit attractive for that slightly longer surety. Either way, in these times at least some good news for those with mortgages.

"...also looks a bit attractive for that slightly longer surety." Quite right.
Surely, more and more borrowers must realise that it's not about the price of money at these levels, but access to it?
How much can be borrowed against a house valued at $1 million at 80% LVR at 2.99% for 5 years to, say, keep a business running? $800,000.
But if that 'V' falls 20% next year, the borrowing capacity drops to by $160,000, possibly for the remainder of that period, but at maybe an even lower cost of funds. It's the 'funds' that matter.
When liquidity becomes more important than price, warning signs are flashing....

I'm no expert but I would be fixing at the lowest rate possible and forget about rates increasing for at least the next 2 years.

A couple of months ago during some of the big rounds of cuts, BNZ put their 3, 4 and 5 year rates all to 2.99%, substantially undercutting the competition especially on the 4 and 5 year rates.

So yeah, fixing for 1 year, or even only 6 months if it's not too much of a premium, is the way to go. I see TSB have 6 months at only 2.89% which is 0.40% over their 1 year rate, compared to the 1% or more margin offered by most of the big banks (ASB at 'only' 0.84% margin).

1.4% in the UK, with a 0.1% base rate. We have some way to go yet.

Are those equivalent no-fee rates? UK banks advertise some dodgy rates which look low but have big establishment costs.

A quick look shows you can pick up 1.7% without fee. It's always up for negotiation.