Update: This review also now includes increases from HSBC.
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Following ANZ's recent chunky rises, the next bank to raise home loan rates is ASB.
And while they now have a lower one year fixed rate than the new higher ANZ equivalent rate, ASB have in fact pushed up their 18 month, two year, and three year fixed rates above the ANZ benchmarks.
That no doubt reflects wholesale rate rises. There is no sign wholesale swap rate rises are easing off.
It is clear that a 5% two year rate is now very close. This is a fast run-up. For perspective, we had a two year main bank rate under 3% last just six months ago. It rose smartly from there and the last sub-4% rate was upon us in early November. But it has taken another five months for us to threaten 5% for this benchmark term, so perhaps a slowing in the rises is evident now.
But will the pace quicken or slow from here? The swap rate trajectory history doesn't suggest a slowing. In fact it might have gotten ahead of retail mortgage rates and banks are probably feeling the margin pressure. They may also be starting to feel volume pressure.
But what they can do is certainly constrained by competitive impulses. The spread between the lowest offeror in the market (Heartland Bank) and the highest (always a main bank) for carded rates is now 71 bps for a one year term, 90 bps for a two year term, and 104 bps for three years. These are unusually wide margins. Shopping around can bring meaningful savings.
And the juicy Australian election budget probably means markets will expect rate rises to start there sooner and be larger than otherwise, putting added pressure on our wholesale rates.
So far, ASB has not matched these home loan rate increases with term deposit rate rises - but that is likely soon.
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.
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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 April 1, 2022 | % | % | % | % | % | % | % |
| ANZ | 4.45 | 4.20 | 4.55 | 4.85 | 5.15 | 5.99 | 6.09 |
 |
4.49 | 4.15 +0.16 |
4.75 +0.21 |
4.95 +0.26 |
5.29 +0.04 |
5.89 +0.29 |
5.99 +0.19 |
 |
4.19 | 3.99 | 4.39 | 4.55 | 4.79 | 4.99 | 5.09 |
 |
4.19 | 3.99 | 4.55 | 4.79 | 4.99 | 5.15 | |
 |
4.19 | 3.99 | 4.29 | 4.55 | 4.89 | 4.99 | 5.09 |
| Bank of China | 3.95 | 3.85 | 4.15 | 4.35 | 4.55 | 4.85 | 5.05 |
| China Construction Bank | 4.15 | 3.95 | 4.35 | 4.50 | 4.75 | 5.09 | 5.20 |
| Co-operative Bank [*=FHB] | 3.79 | 3.69* | 4.19 | 4.50 | 4.75 | 4.99 | 5.09 |
| Heartland Bank | 3.49 | 4.05 | 4.25 | ||||
| HSBC | 4.09 +0.08 |
3.95 | 4.49 +0.20 |
4.69 +0.24 |
4.89 +0.24 |
5.04 +0.15 |
5.19 +0.15 |
| ICBC | 3.85 | 3.69 | 3.99 | 4.25 | 4.55 | 4.85 | 5.05 |
 |
3.99 | 3.75 | 4.19 | 4.35 | 4.69 | 4.99 | 5.05 |
 |
3.95 | 3.95 | 4.39 | 4.55 | 4.75 | 4.99 | 5.09 |
Fixed mortgage rates
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62 Comments
Hate to point it out but the OCR doesn't track the interest rates very well at all. The banks look more or less independent to me, they are moving rates as we speak not waiting for that 50 bps rise to tell them they can. We get lines like "Already priced in" and jargon like that before its "Official".
I think as we start to see shorter term fixed mortgages roll over reality will sink in, especially when we see a 50bp OCR increase in a few weeks?
The cost of living is about to sky rocket and combined with rapidly increasing mortgage costs many will have some tough decisions to make.
Discretionary spending is going to plummet.
The money train is about to be de-railed.
I can vaguely remember the GFC (didn't own a home then so paid less attention) when fixed rates were high (10%?) and then there was the scramble as the interest rate plummeted leaving a whole bunch of people stuck on a high rate fixed term without the cash to pay the break fees as the rates fell down to 5%. It's a balancing act. At least I have 18 months before my first fixed term portion comes up. Here's hoping prices fall and then interest rates do.
I've had my mortgage come up for refixing. I enjoyed the super low one year rate. Now I've refixed with my mortgage split between 1, 2 and 3 year fixed rates. On the 2 and 3 year rates the banks are still making competitive offers but the 1 year rate is as shown in the card rate. So in short I have a spread including longer terms.
It's quite likely that many people have been prepared to break their current rate for a longer term. This should be obvious in the RBNZ statistics later in the year.
> It's quite likely that many people have been prepared to break their current rate for a longer term. This should be obvious in the RBNZ statistics later in the year.
I suspect most people have been paying very little attention. Maybe a good chunk of posters here would have done that, but overall population? Not so much imo.
I have been fixing long for the past 2 years+, obviously due to my frequent reading on this site and making a call based on the information I see.
The few people who I have spoken to (family/friends) about mortgage rates or property values seem willfully ignorant of these stats. Even 2 weeks ago a close relative who is building a new house emphatically called out any chance of property price falls.
They will be confronted with higher rates when they go to refix if they've just been fixing for 1 year terms (which is around 60-70% of mortgages). They will realise the rates are going up when they see the percentage or the payment going out of their account. Will they care or change behaviour? Probably not in many cases.
I have friends who have broken and refixed to longer rates this year. Perhaps they are a minority that's paying attention.
Meanwhile this time last year:
1 Year Rates 2.3% & 2 year rates 2.6%
Someone who fixed $500k for 1 year 12m ago will now be coming into an extra roughly $100 per week on their mortgage.
https://www.interest.co.nz/personal-finance/110147/new-zealands-largest…
Now lets be a typical FHB in Auckland in late 2021 who barely squeezed a mortgage of 900k out of the bank so they can buy a 3 bedroom run down shed in Mangere - they now need to find almost an extra $1000 a month while the cost of everything is skyrocketing.
Sounds feasible.... yeah nah.
Yes and if it looks like there is trouble coming....here's a nearly unlimited 0% funding for lending gift line from the RBNZ....meanwhile the executive team all take away million + salaries for their great work managing risk! When ultimately there is no risk because Mum and Dad (RBNZ) always come to the rescue.
Here's a perspective to consider :
Most banks are owned by smaller shareholders, thousands and thousands of individual shareholders. Some times direct, some times via fund managers & wholesale institutions. Its also global. NZ banks may be owned by parent cos in Aussie, parent cos in Aussie may be owned by stakeholders all over the world etc.
If you have a Kiwisaver fund you are likely also a shareholder.
Banks are NOT owned outright by a small group super rich individuals lording over their piles of gold like some rich scrooge. Banks are stock standard listed companies -> They exist to make a profit for said shareholders. And the people (managers) working in banks don't own controlling portions of the banks, they are just making wages whilst working for the benefit of your kiwisaver fund (even the CEO).
Do most people complain when banks make record profits = Yes
Do most people complain when their kiwisaver fund makes record YOY returns = No
Perhaps read up on how fixed rates are funded. Not through a variable OCR rate. David C has posted a number of articles on here in the past. OCR is not connected to 2 year fixed rates. Now, wholesale markets would use expected track of OCR over the swap period (1 year, 2 year, 3 year etc) to arrive at a value.
Meanwhile in Europe you get a fixed 20 years rate for 1.5%. Even the US after the GFC started doing loans fixed for the whole period. It might be costly when interest goes down true but at least you know the cost in advance. And it times like now it is a no brainer…
What most people don't realise is that we've been in a massive QE fueled global bull market for going on 14 years now. Some younger people don't know any different....so have no context
Floating interest rates back in 2007 were >10-11% when you could still buy homes for <$350-500K in AKL...and when the interest rate actually mitigated house price inflation through increased mortgage servicing costs
Fast forward 14+ years and people have grown accustomed to and completely dependent on low interest rates and a bull market to bail them out
From a market cycle perspective this is a repeat of 2005-2007 where commodity prices increased alongside interest rates to slow the market down, the first signs of problems will be in the debt market/ inverted yield curve which then rippled through a risk-off view in the stock market which then impacted business/ investor confidence and lead to higher unemployment and defaults etc across the board
From a current stock market perspective, I believe we are not that far off a major multi-year top and major shock within the next 6-24 months where we could expect a decline of 20%+ to at least hit a "technical" bear market or even significantly more 30-50%. Is this the end, No... it will be a great buying opportunity! but it will come as a shock to many
Debt market leads, stock market then 4-6months later business markets follow - then much later governments react....
Even in the GFC the banks here managed their way through by controlling the number of mortgagee sales. Many sales were forced but not by overbearing use of that force. None of the banks blinked and so the ponzi held.
And that's what it will take, one blink and it's all on.
Which is one of the problems with the RBNZs slow OCR track. If high rates cause a big recession, they still don’t have much capability to fix it as the OCR is still so low. The OCR isnt setting interest rates, it’s peoples perception of what the OCR should actually be that is.
"it will be a great buying opportunity" for people who still have jobs.
This 'there's no possible way I could lose out in the event of a total housing collapse" is equally as dumb as the people who thought the party could keep on going forever. Although at least they did have the entire financial and political system egging them on to believe otherwise.
The age-old saying springs to mind: "A recession is when your neighbour loses their job, a depression is when you lose yours". Aspiring FHBs sitting on the sidelines won't be buying anything if the tide goes out totally and employment plummets.
TBH I never thought we’d get here, I thought it would be difficult to even get back to 4% mortgage rates without crashes and bankruptcies. Now 6%+ seems almost certain. Luckily it doesn’t affect me much, but for some people (a lot of which are just innocent people wanting to buy their first home) it must really suck.
I don't think it will really suck until rates get to 6% and house prices have hardly fallen for the FHB. The combination of the two has yet to play out. There is going to be some shocks coming for sure, problem is nobody really knows who will get the biggest shock.
When it comes time to refix, don't forget that if you're paying your loan back quicker than minimum payments (ie not a 30 year term) you can ask the bank to extend your loan term back out to keep payments the same or help absorb some of the rate rise hit. This is still costing you more money long term but may help alleviate the direct hit or higher repayments
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