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ASB matches its rivals with a home loan rate cut and three increases for longer term rates, completing an adjustment that responds to rising longer term wholesale rates. A pause may settle in now

ASB matches its rivals with a home loan rate cut and three increases for longer term rates, completing an adjustment that responds to rising longer term wholesale rates. A pause may settle in now

The lower rates ASB offered for three, four and five year fixed terms for home loans have now vanished.

New Zealand's second largest mortgage lender has fallen into line with its main rivals, announcing rate hikes Monday morning.

But ASB has also trimmed their one year fixed rate, also to match its main rivals.

These changes complete a realignment of 2021 mortgage rates by the main banks that ASB actually started back in late April. And Monday's change might signal an end to them for a while.

That is because long end yields have stopped rising in the past week or so, to some surprise. The markets will be in pause mode this week as they wait to see how the US Fed reacts to rising inflationary pressures. The bond market is picking they will claim "inflation is temporary" and make few adjustments. All eyes will be on the dot plot however.

The other oddity it that local big banks have not yet taken any material funding from the $28 billion Funding for Lending Programme (FLP) offered by the Reserve Bank. So far they have accessed just $3 billion over the past six months, with everyone bar ANZ dipping in for some minor drinks. One factor may be that deposit growth has remained relatively strong, supply the funding they need at costs that are less than the OCR (0.25%) price the Reserve Bank has set. The banks have also loaded up on covered bond issues and these are likely costing them less than the FLP as well.

The latest data on performance ratios (P3) shows banks are maintaining their net interest margin in this low interest rate environment.

The opportunities to lock in especially low five-year fixed rates may have faded somewhat, but the current offers are still historically low, so probably still deserve attention if you are the view that rates can only go up over the next few years.

The lowest rate for any fixed term is still Heartland Bank's 1.85%. And the highest rate for any fixed term is ANZ's new five-year rate of 4.39%. That is the widest/steepest since 2012.

One useful way to make sense of these changed 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 the moment.

Updated to now include similar changes by TSB and BNZ.

Fixed, below 80% LVR 6 mths   1 yr   18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at June 14, 2021 % % % % % % %
               
ANZ 3.39 2.19 2.35 2.59 2.99 3.99 4.39
ASB 2.99 2.19 2.49 2.59 2.99 3.39 3.69
2.99 2.19 2.35 2.55 2.99 3.39 3.69
Kiwibank 3.55 2.19   2.55 2.99 3.39 3.69
Westpac 2.99 2.25 2.45 2.59 2.99 3.39 3.69
               
Bank of China  3.45 2.15 2.15 2.55 2.75 3.05 3.35
China Construction Bank 4.70 2.65 2.65 2.65 2.80 2.89 2.99
Co-operative Bank (*FHB only) 2.25 2.09* 2.45 2.59 2.94 3.24 3.54
Heartland Bank   1.85   2.35 2.45    
HSBC 2.79 2.19 2.19 2.45 2.69 2.99 3.19
ICBC  2.89 2.25 2.35 2.35 2.65 2.89 2.99
 SBS Bank 3.39 2.19 2.39 2.49 2.79 3.09 3.39
 [incl Price Match Promise]  2.89 2.19 2.35 2.55 2.99 3.39 3.69

Fixed mortgage rates

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12 Comments

If TD rates are around 1% for 1 year how can that be cheaper funding than OCR of 0.25%? Do TDs count as capital that allows increased lending (money creation)? e.g. $1 TD allows $5 lending giving cost of 0.2% per dollar whereas $1 FLP = $1 lending equals cost of 0.25%?

Don't conflate the term deposit book with all deposits. The TD portion is running off fast, while the at-call savings and current account balances are rising and it is these two that have virtually zero interest cost. And the at-call deposits are growing much faster than the TD portion is atrophying.

The strangest thing I read was a few weeks ago when the Mortgage Book for all the major banks was revealed and only about 1% of borrowers had gone long on the 3% for 5 year term. Seems like all the usual suspects on radio and newspapers were still singing from the same old choir book to spread out your mortgages, but wasn't this time different? I certainly thought so, and now the opportunity is lost.

Be careful of those charts. Yes they look very interesting and they do show most mortgages are due to roll over with a year. But don't use them to find the term of the fixed loans people are taking out. If your five year fixed term is due to roll within the next year, it will be in the <1yr category. Those charts are "time to reset" perspectives.

ANZ 4.39% for five years looks ominous . . . a sign as to where things could be headed?

Not necessarily. ANZ doesn't offer 4 and 5 year 'specials' in their rate card. Those are their stahndard rates. The other banks offer special for those terms. So its not really an apples-for-apples comparison. Our table shows each bank's lowest rate, but they may not be comparable. BNZ's standard 5 year is 4.29%. Kiwibank's is 4.54%. So ANZ is not out of line on that equivalent basis. (But ASB doesn't have 'standard rates', so their advantage is a real one.)

Indeed. All signals globally are up. US is reporting 5% but they have the same fake inflation reporting system that we do. Lots of noise that the real rate over there is over 10%. Is global debt a pump fake move....?

As David alludes, ANZ 3.99% for four years but they were happy to offer me 3.09% automatically through the ANZ banking APP.

Nah, they are actually offering 3.39%. Carded rate is just noise.

I emailed my personal banker last Thursday and requested a rate lock of 3.39% (advertised)
They replied today saying its 3.69%.
I asked them to honour the rate advertised last week but I doubt they will...

I see the banks are doing the old short term rate discount trick...

Also known as the long term rate trick discount.