As borrowers shift their sights to longer fixed terms, Kiwibank trims its one year rate to a very competitive level. In the background swap rates rose, then fell sharply over the past week or so

Over the past three weeks, mortgage interest rates have been generally stable. The main activity has been the bedding-in of the prior floating rate increased from the last RBNZ OCR hike, along with some smallish adjustments by challenger banks.

But in the background, wholesale swap rates have been very volatile.

The last significant change by a major bank in home loan rates was a small trim by ASB on July 8. Since then, swap rates rose more than +30 bps in the next two weeks, and then have fallen more than -30 bps over the past week or so for a one year term, and -40 bps for a two year term..

Banks generally watched the rise without responding, but the fall has motivated Kiwibank to come back to market with a rate cut.

Kiwibank has cut its one year rate by -24 bps to 4.95%, and cut its two year fixed rate by the same amount to 5.45%.

Their new one year fixed rate is -30 to -40 bps lower than all its main rivals, and only a mere +5 bps above market-leader for rates in Heartland Bank.

Their new two year fixed rate however only matches their rivals (even though the net fall in wholesale rates is more significant for two years).

Kiwibank didn't change its term deposit rates at the same time, which leaves its one year 4% offer in place.

If other banks follow Kiwibank's one year rate move, they will be seeing margin compression for all business they write for a one year fixed rate. But already five other challenger banks offer sub-5% one year rates.

Meanwhile, borrowers seem to be more motivated by protecting themselves from the upside of potential home loan rates, rather than getting the last drop of savings by going short. Fixed terms of one and two years are shifting out longer, with three and even five year commitments becoming more popular.

The next OCR rate change is due on Wednesday, August 17, when a full Monetary Policy Statement will be issued along with intensive commentary, so we will get to find out the central bank's current thinking about these settings.

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 although break fees should be minimal in a rising market, they will start to bite in a falling 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 August 1, 2022	%	%	%	%	%	%	%
ANZ	5.35	5.35	5.65	5.45	5.99	6.85	6.95
	5.35	5.25	5.65	5.45	5.99	6.85	6.95
	4.99	5.35	5.59	5.39	5.99	6.09	6.19
	5.45	4.95 -0.24		5.45 -0.24	5.89	6.05	6.29
	5.35	5.35	5.59	5.45	5.99	6.29	6.39
Bank of China		4.99	5.29	5.29	5.69	5.89	5.99
China Construction Bank	5.35	5.35	5.65	5.45	5.99	6.85	6.85
Co-operative Bank [*FHB special]	5.09	4.99*	5.39	5.39	5.89	6.05	6.19
Heartland Bank		4.90		5.29	5.39
HSBC	5.29	5.09	5.29	5.34	5.59	6.29	6.39
ICBC	4.99	4.99	5.39	5.15	5.89	6.09	6.19
	4.95	5.15	5.35	5.39	5.49	6.09	6.25
	4.89	4.99	5.25	5.29	5.65	5.89	5.99