More mortgage rate hikes have been announced Thursday.
BNZ has raised its carded rates, but basically up to the levels ANZ and Kiwibank had earlier adopted.
BNZ's rises range between +14 basis points and +20 bps across the whole curve.
Their move leaves Westpac's rates at the low end of what the big five are offering. A Westpac move up is likely soon, you would think.
But will they follow ANZ too, or will they follow ASB?
ASB has been 'bold', pushing their rate card up well above their main rivals.
The ASB increases range between +20 bps to +55 bps.
The new ASB one year carded rate is still below 4%, just, but that is about the only term where they are rate-competitive any more.
ASB's 18 month rate is up +39 bps to 4.64%. Their two year rate is up +34 bps to 4.69% and their three year fixed rate is up +36 bps to 5.25%.
That new ASB three year rate is now the first to breach the 5% level for a three year rate in the current hiking cycle.
Their four and five year rates have risen as well with the new ASB five year rate now 5.80%. It is easy to see 6% on the horizon there soon.
ASB's hikes have separated them quite a bit from the rest, now with meaningful rate disadvantages.
But perhaps ASB's moves are showing where home loan rates are going soon.
Update: Westpac and Cooperative Bank has subsequently also raised rates. They are now included in the table below. Both these two also rates term deposit rates at the same time.
Wholesale swap rates have been climbing relentlessly recently. And with today's (Thursday's) US Fed policy rate increases now locked in, along with a sharper dot-plot (not to mention the Bullard dissention who wanted even faster rises), The background policy rate direction is clear.
It won't be long before our local rate cards have a 6% set.
One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculator which is also below. (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. But break fees should be minimal in a rising market.
Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.
| Fixed, below 80% LVR | 6 mths | 1 yr | 18 mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| as at March 17, 2022 (UPDATED) | % | % | % | % | % | % | % |
| ANZ | 4.19 | 3.99 | 4.39 | 4.55 | 4.75 | 5.70 | 5.90 |
 |
4.49 +0.30 |
3.99 +0.20 |
4.54 +0.39 |
4.69 +0.34 |
5.25 +0.36 |
5.60 +0.55 |
5.80 +0.55 |
 |
4.19 +0.10 |
3.99 +0.14 |
4.39 +0.20 |
4.55 +0.20 |
4.79 +0.14 |
4.99 +0.10 |
5.09 +0.10 |
 |
4.19 | 3.99 | 4.55 | 4.79 | 4.99 | 5.15 | |
 |
4.19 | 3.99 +0.20 |
4.29 +0.20 |
4.55 +0.20 |
4.89 | 4.99 | 5.09 |
| Bank of China | 3.85 | 3.65 | 3.95 | 4.15 | 4.45 | 4.85 | 5.05 |
| China Construction Bank | 3.85 | 3.85 | 4.09 | 4.35 | 4.65 | 4.95 | 5.05 |
| Co-operative Bank [*=FHB] | 3.79 +0.20 |
3.69* +0.20 |
4.19 | 4.50 +0.20 |
4.75 | 4.99 | 5.09 |
| Heartland Bank | 3.25 | 3.79 | 4.15 | ||||
| HSBC | 3.94 | 3.75 | 4.15 | 4.25 | 4.49 | 4.74 | 4.99 |
| ICBC | 3.85 | 3.69 | 3.95 | 4.15 | 4.55 | 4.75 | 4.95 |
 |
3.79 | 3.55 | 3.95 | 4.10 | 4.55 | 4.74 | 4.95 |
 |
3.69 | 3.69 | 4.19 | 4.35 | 4.69 | 4.99 | 5.09 |
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82 Comments
Rising interest rates help those on small incomes, who have (small) savings in the form of bank term deposits - such as elderly people whose primary income is from National Superannuation.
Many property owners have done exceedingly well for themselves over the past 5-6 years or so. It's time to give the less fortunate a bit more of a chance.
TTP
Your savings become worth less when the currency they're denominated in devalues (i.e. monetary inflation), not when the price of cauliflower or timber goes up (i.e. price inflation). For the same reason, the cost of a loan is determined by the rate of interest minus the rate of monetary inflation. The difference is important. Subtracting the CPI from the OCR doesn't tell you anything.
M3, but the RBNZ stopped using this a while back. I think the closest thing now is probably the "broad money" measure used here.
If you want to see it in graph form, Trading Economics track it here. Couple of interesting things to note from the graph is the deflationary impulse around the time of the GFC, and the massive inflationary impulse around the time COVID hit and we fired up the money printers. It also shows that real inflation has been a lot higher than what the CPI suggests.
Thanks - the Trading Economics chart over the max time scale looks like exponential growth of money.
My brain can't comprehend how that is sustainable without either triggering at some point a complete loss of faith in the system and deleveraging/defaults/deflation or the opposite of hyperinflation to avoid debt defaults. It would appear that to avoid hyperinflation we need to continue to increase productivity and create even more goods and services to offset the increased money in circulation and if we don't do that, we have excess money chasing the same amount of G&S (or less if we have a recession).
What are your thoughts on the sustainability of that growth of money?
That's the problem with fiat currency. Since it's not backed by anything, there's not much to stop governments printing more of it whenever they feel like building new infrastructure, or fighting a war, or holding a flag referendum. If that graph went back to the days of the gold standard, you'd see a more-or-less horizontal line, because printing money simply wasn't an option like it is today.
There are downsides to printing money, though, and ending up with too much inflation is one of them. However, printing money is not what we've done. What we've done is monetise debt. QE ("LSAP") is one example. We do print money, but we also add a corresponding liability to the other side of the ledger.
This still creates inflation, since it's still new money that didn't exist before. But as that debt is paid down - or defaulted on, which we're starting to see more and more of - the money is removed from the system. This process is highly deflationary, and I honestly think that a deflationary recession is probably where we are headed eventually.
I don't agree its backed by houses and infrastructure and actual "Physical" stuff. The reason its going exponential is more people on the planet borrowing even more money to buy even more expensive stuff. In theory there is no upper limit to the number of dollars, it just keeps on going and life as you know it carries on as normal while its being paid back. It all turns to shit when there is massive corruption, massive inflation, wars and pandemics and it cannot be paid back and you have a default situation. The question you need to ask yourself is how close to a default is NZ ? I would say not very close at all.
What would the world look like if in 10-15 years time the Yuan is the world reserve currency - and not the USD.
Would interest rates be at zero and what would our inflation rate be? What would confidence be like in capital markets and sourcing for our banks funding portfolios?
Who would we be trading with and what would that mean for our economy?
The USA is never going to let go of their currency being the global reserve without a fight and I'm not talking about a one on one with Biden and Xi in the ring I'm talking WW3. Everyone will have a whole lot more to worry about on here that what their house is worth this week.
It might be happening all around us right now if new trade agreements are made between the likes of Russia, China, India and the middle-east oil producing countries. The USD might fall out of favour, especially if these countries see the damage that the US has just inflicted on Russia...why take the risk of trading in USD?
It isn't a new concept and generally when a reserve currency country starts walking down the path of debt monetization, to fund its excess spending to be able to fight off other nations competing to be world power, it is only a matter of time before that country losses its status as the world power (it simply can no longer afford to fund a military and it becomes politically unstable (as we see in the US))
This doesn't make sense to me - you are saying that your savings don't become worth less when the prices of things (cauliflower, timber etc) goes up. But it seems to me that's exactly what happens, because if the prices of things you buy with money go up, then that means your money can buy less stuff. Isn't 'your money buys less stuff than it used to' just the same thing as 'your money is worth less'? (So long as the price increases are on basic everyday things, and are fairly across the board, as they do seem to be. I can see why if it was only, say, the price of yachts and diamonds going up, then that wouldn't mean my savings would be worth less as I have no intention of ever buying a yacht or a diamond).
No, it's not the same thing. The CPI only covers consumer goods and services. If I take my savings during a period of high consumer price inflation and invest them in, say, stocks or commodities, or pay down debt with it, I get the same "value" as I would have during a time of low consumer price inflation.
If I do the same thing during a period of high monetary inflation, it doesn't matter what I buy. I will get less of it, because my money is worth less.
The demand for that money must also come into as well. You could have a certain level of money supply and if the demand for it drops, then it is also worth less. Which I think aligns with the milkshake theory guys concept where he thinks the USD will become more valuable before it completely dies (because 40% of worlds debt or thereabouts is in USD so there is still demand for it - regardless of how much the US put into circulation). But if there is no demand, then creating more of it allows it to lose perceived value at an even faster rate.
I guess the risk for the central banks is that if they have created all this money now and we go deflationary in terms of consumer items....where does it all go? Back into bidding asset prices even higher again because not all of it is required to buy our regular goods and services?
Not necessarily - my view is that when you create more debt it comes with a liability (interest). So the debt created needs to be offset with increased productivity in terms of goods and serivces across the economy, resulting in increased income that is equal or more than the new interest from the additional debt created. Across the globe we haven't been doing that and we've got away with it because we've been able to push the cost of money to zero to offset that lack of additional productivity.
If you simply create the debt without the productivity, all you are doing is walking into debt default and death of that fiat currency (which has happened to most empires throughout history). Your outgoings become greater than income.
Now we have all this debt, with the risk of increased liabilities from interest payments, but we're not more productive. So all we have created a large drag on our ability to improve our living standards because our liabilities are too great.
Further to this - using the USA...they have to trade in order keep their reverse currency status and to maintain their living standards (cheap products...). If they continue to devalue their currency to avoid default on their national debts, other countries need to do that at the same rate, otherwise their is no interest rate parity at play and balance between FX import/export costs (it can cause hyperinflation for weaker currencies who try to devalue at the same rate - look around the globe). The US can devalue their currency faster than other countries because there is more demand for it internationally because about 40% of the worlds debt is paid in USD (i.e. there is global demand). It's an unfair game on other countries who don't have the same ability to create the reserve currency and is often why you see global wars at this phase we are in now (75 years post Bretton Woods - which is about the normal time that a reserve currency has been able to remain dominant across the last 500 years).
errr... except we have a negative household savings rate... the highest in the world
https://www.stats.govt.nz/news/households-continue-to-spend-more-than-t…
It may not be great, but it is not negative, and hasn't been since 2017.
Here is more up-to-date data than your link.
0.4% savings rate is pretty terrible. That's an average too. People from Asian countries have much larger savings rates in their own countries and particularly the people from those countries that migrate to NZ, so native NZers are probably at the bottom of the heap with negative savings.
I myself, have always had a savings rate of 40-50% of my income, for the last 30 years. which has worked very well. I still save the same percentage and generally now earn more than my gross salary every month in dividends and other investment gains (all mostly tax-free and not housing).
Putin's war has put a stop to this level of returns in the meantime, but, it will only be temporary. I'm almost 100% invested outside NZ, so as the world recovers, and NZ enters recession/economic disaster over the coming months and into next year and probably the year after those overseas investments valued in NZ dollars should be looking very good.
Saving is essential. Should be taught in schools. Compounding returns is just simple maths. I don't know why NZers just don't get it.
Most NZders do not have discretionary income to save and are literally sacrificing teeth and basic medical needs just to get by. You are the proud generation that actually led to the greatest housing crisis NZ has ever had where we have so many families that literally cannot afford a simple 1 bedroom without access to a kitchen or laundry. Having 40% -50% of your income you don't need for housing and basic utilities is where your basic maths fails sooo so hard. Please learn again how to construct a simple mathematical model. Go on try to do it with a minimum wage with a family. How can you not grasp the lack of simple mathematics you just demonstrated? It is also why we have a cost of living crisis and housing crisis. Lack of understanding of the effect of actions long term for different income groups.
Baked in to a large extent, but the fact that the Fed has aligned with some of the more hawkish predictions for 7 hikes this year is another green light for RBNZ to act in line with ANZ's predicted track, at least in the short term. I'm still picking 50 bps next month, with increasing confidence.
Well, if you look at yesterday's NZ trade deficit data, the demand is definitely really hot there and it's not sustainable. RBNZ will have no choice but to act 50 bps hikes.
Imports continue to widen current account deficit | Stats NZ
It will be another 25bps the RBNZ has already signaled this by only going up in small increments when it was "Obvious" to everyone it should have been 2 x 50 bps already let alone now. I think its deliberate in trying to keep the property market alive as already stated here a massive 60% of home loans fall due this year and the RBNZ WILL kick the can down the road for months to come. Its an attempt at a soft landing but whether or not the RBNZ forgot to put the landing gear down or not has yet to be see.
Well plenty of people on here have stated that rising interest rates were impossible and yet its happening. Granted it could rise over the next couple of years then fall again but it could be 5 years before you see the low rates we have enjoyed over the last couple of years so that may not help you survive what's coming.
Not sure where you are getting this impression from. In last policy update they specifically mentioned they were on the fence between 0.25 or 0.50 for the February decision.
They also specifically talked about being willing to move in larger increments in the upcoming reviews.
Seeing those long term mortgage rates go above 5% again is a big oof. The short term rates are still historically cheap but people pay in dollars not percentages. The reduction in discretionary spending isn't going to help businesses recover from the covid related restrictions.
Re fixing will currently cost approx +2.5% which will be $12,500 on a $500K mortgage thats $240 of weekly discretionery income not being spent elsewhere so recession looms and hopefully your mortgage is no more than $500 K and you have more than $240 a week of discretionery spending.Anyone see possible financial problems arising - asking for a friend impersonating a treasury minister!
The problems will be very real. There are plenty of $500k mortgages in circulation from the last few years. I don't have one of those myself as my house cost less than $500k.
I have also paid off my mortgage much faster than the minimum so the interest rates don't have the same impact on my cash flow. There's been 5-6 years of low interest rates for people to take advantage of. Perhaps many will realise that using the money to buy expensive cars and boats might not have been the best choice.
Those with mortgages can also lose if wages remain well below CPI for a sustained period while mortgage rates rise. It could cause people to default on debt. If the gap remains wide enough, do you pay the rent/mortgage or pay the rates, utilities and/or food - and in what priority?
Yvil makes repeated little personal digs at people, that gets people's backs up, someone says something nasty about Yvil, Yvil complains that this feelings are hurt. Rinse, repeat.
Whether inflation is bad or good in general for people with mortgages, and in what ways, has nothing to do with how much time any individual spends commenting on this forum.
Why do we have record low unemployment rates but record high welfare if everything is so good?
(and please cease making this personal....who says I need more money? I've got enough to be content...my concern is about financial and social stability of society, not my personal circumstances)
Simple we just don't count those people who cannot get jobs, you know those with disabilities, those discriminated against (e.g. ableism, sexual orientation discrimination, racism etc), those with partners, those who are older (but still want to work), those who have no access to work, those who have no work available in their area and cannot afford to move, those who also need to work part time as medical carers since the government cannot even be trusted to feed and dress those with health needs etc etc. As a flat basis we stopped counting those who would never find gainful employment with NZ employers when the low income migrant tap is still permanently on regardless of the flow rate not being as firehosey as it was. The number of trained experienced engineers who cannot find work in NZ I have even personally met is now too high it outnumbers the bones in my body.
I generally enjoy reading your perspectives on this site, regardless of whether or not they align with my own. I believe you have some pearls of wisdom to impart to those willing to think them over, but they are tarnished when such comments as this are made. Please don't.
Not that simple, winning or losing for mortgage holders really depends on the price increases for their houses, if the price increase is below inflation rate (which is happening at the moment), I can not see they are winning unless if they bought their houses while the price was still low, that's why inflation is bad for everyone...
US equities. Bonds not the place to be with rising rates. With war in Europe, and increased geopolitical risk in 2nd and 3rd world nations, I would avoid emerging market equities. US equities seems the likely place for wealthy to direct funds. Because in an inflationary environment you want to own assets, either equities or real estate. And equities own fixed assets, and inflation pushes up expenses, but also pushes up revenue and profit. I tend to base investment decisions on likely destination for money flow, and avoid narratives.
No, I tend not to over think things. There is always something to worry about, as markets climb a wall of worry. Just need to figure out where wealthy will place their funds.
For example, I gave my kids in their early 20s deposits to buy properties in the first 2020 covid lockdown. Logic being money goes into bonds/ term deposits, equities or property. Interest rates were slashed, so in NZ, less incentive for term deposits. Share market has just crashed, fear will keep people out of equities. So the last man standing is property, and interest rates have been slashed, that is a massive tail wind, so property was a no brainer.
Sounds to me that for you and your kids would not be a problem to lose few 100ks.
Other than being slightly jealous myself (even with a wonderful salary for me that would be a problem) I wonder...
Would you go to property anyways, right now, if it was an all-in choice?
I would be reluctant to buy property for investment purposes in NZ at present. If I didn't own my own home, I would look to buy during a likely NZ recession occurring in the next 18 months. But, if I had a young family, a 20% deposit and a good income, I may just go ahead and buy.
Though, other than long term bonds (10 year plus), I cannot think of any more overvalued assets in the world than NZ property at present. Though my family members all still own our own residences, and will not be selling.
Going to be painful for leveraged investors as the tax deductibility of interest is phased out...
Also painful the economy more broadly. There will be lots of indebted homeowners hunkering down and cutting out discretionary spending. I get the feeling that we'll be back in a down cycle for interest rates more quickly than people realise.
Interesting times ahead...
Yup. This is why I'm feeling pretty dubious about the repeated calls from hospitality for more and more government support. I understand it's been really tough for hospitality, and that sucks. But the reason I'm not going out and spending lots of money in cafes and things isn't omicron - it's that I need to reprioritize spending in light of price increases on things like groceries and utilities and rates (and, luckily my shortest term is a 2-year fix, but most likely mortgage payments). When businesses are struggling because lots of people can't afford to patronize them any more, the solution is not to spend the tax money of the same people who can't afford meals out to prop up the restaurant industry.
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