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HSBC ends its 1.99% fixed home loan offers, raising them to 2.25% after a two month run at the unusually low level. All eyes are on how the RBNZ will react to rising international benchmark rates

HSBC ends its 1.99% fixed home loan offers, raising them to 2.25% after a two month run at the unusually low level. All eyes are on how the RBNZ will react to rising international benchmark rates

There have been very few changes to any home loan rates over the past two months.

But on Tuesday, in what might be a sign of the times, HSBC has changed some key rates - and increased them.

HSBC has moved 12 and 18 month fixed rates up by 26 basis points to 2.25% for each of these terms.

These are still low rates, lower than any of the main banks. But the advantage has narrowed.

And, moving back up over 2% means it is only Heartland Bank that now offers a sub-2% fixed mortgage rate.

All eyes are on international benchmark yields, especially the US Treasury 10 year, and these yields have risen. In fact, since HSBC's February 10, 2021 rate cut, this benchmark has risen more than 50 basis points.

But long term wholesale rates don't directly affect the funding costs for 12 and 18 month home loan rates. These are more influenced by NZ government bond yields for maturities of three years or shorter. And this is the part of the wholesale market that the Reserve Bank is targeting with its Large Scale Asset Purchase bond buying programme, aiming to keep rates low - which is happening.

The one year wholesales swap rates has risen just 6 basis points in this two month period. The two year has risen just 7 basis points (although it was up from there a week or so ago). And the three year is up 17 basis points. So the Reserve Bank is being successful in keeping background interest rates restrained in the part of the market that is influential for home loans.

And given that major moves are being made by the Government (interest deductibility for investors) and the Reserve Bank (loan-to-value ratio restrictions), both of them will probably want to see how these changes play out in holding back rampant house price increases before they ease up on the interest-rate front.

HSBC's Premier eligibility for new clients is for those who borrow $500,000 or more, or existing customers who borrow an additional $100,000 or more. There are other criteria, including minimum deposit and equity criteria.

The recent surge in housing and home loan demand has meant that banks are under no pressure to cut rates when borrowers are lining up to borrow. Banks are more in a rationing stance, ensuring they get the best quality of new client. Should borrowers get the idea that rates might rise, this might change.

One useful way to make sense of these new lower home loan rates is to use our full-function mortgage calculators. Term deposit rates can be assessed using this calculator.

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 April 6, 2021 % % % % % % %
               
ANZ 3.39 2.29 2.55 2.69 2.79 3.90 3.99
ASB 3.39 2.29 2.49 2.59 2.65 2.99 2.99
3.39 2.29 2.49 2.59 2.79 2.99 2.99
Kiwibank 3.55 2.35   2.65 2.65 3.09 3.19
Westpac 4.15 2.29 3.25 2.69 2.79 2.99 2.99
               
Bank of China  3.45 2.35 2.45 2.55 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 (*FHB only) 2.29 2.09* 2.59 2.59 2.79 2.89 2.99
Heartland Bank   1.99   2.35 2.45    
HSBC 2.79 2.25 2.25 2.35 2.65 2.79 2.89
ICBC  2.89 2.25 2.35 2.35 2.65 2.89 2.99
 SBS Bank 3.39 2.29 2.29 2.29 2.65 2.89 2.99
 [incl Price Match Promise]  2.89 2.29 2.49 2.49 2.65 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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6 Comments

All in all an indication of possible winds of change. Recent past falls in interest rates could now may be bottoming out.
As mortgages roll over, rather than short term with expectation of future lower rates one may be starting to consider longer term options.
Need to also consider possibly being prudent by paying down higher interest debt and questioning that large scale discretionary spending.
Not all doom and gloom but 1% on $700,000 mortgage is $270 a fortnight.
Maybe I’m just cautious by nature. I tend to take an umbrella if it looks like possible rain; if it does it’s not an issue, and if it doesn’t, then nothing is really lost.

Your last sentence is why I've suggested for some time that 'down'here' people should be borrowing everything that any lender will offer them, and storing it; not spending it, in the most cost-effective liquid vehicle they can find. If it doesn't rain, then just repay what's been an insurance policy with a facility fee. But if it rains....just like at Countdown on a winter's day, the umbrella shelf will be bare.
And with this, and the recent regulatory changes, there seems to be to odd splash of rain on our foreheads, and now it's probably too late to dash back inside to grab a brolly.

Banks have been very lenient in terms of letting people opt to put any part of their mortgage on a fixed rate term of any duration. They must be happy that customer could easily meet the servicing criteria if rates increased a couple of percent per year or they'd be managing the risk of rising rates.

As always happen in NZ, the RBNZ follows the banks and never lead by example. Whether it is LVR restriction (ANZ have raise LVR for investors), Interest rate (By HSBC) & TD (by SBS). RBNZ will follow because they hired bunch of fools who only know how to copy and paste the decision after it is taken by big financial institutions.

What a waste of money paying idiots big paychecks who look into others sheet for answers & never lead the market in taking any decision.

Well thats the bottom of the interest rate market from the look of it- rates will only rise from here.

Yesterdays Auction results were pretty poor with over 50% passed in execept for the central auction rooms where 8 of the 14 properties sold. In one of the auctions 13 of the 18 lots were passed in with several only reaching their 2017 RV numbers.

HSBC need to focus on new sight, bigger vehicle to target (Westpac) - And do not worry, as govt & RBNZ do keep the stats of how many Kiwis that borrow more than 5x DTI ratio, in fact as per prudent OZ Banks lending practices estimated.. most of them in that bracket will ensure to have the govt. bail out, NZ private investment umbrella for rainy days, for large number of citizens, it's precisely always be the govt bail out. Without those 'excessive' QE/FLPs, subsidies.. where do you think those profit coming from last year?