Wholesale interest rate markets are now pricing in more than a 50 basis points rise at the next Reserve Bank (RBNZ) Official Cash Rate (OCR) review on November 23.
The priced-in amount is not a lot more yet, about 59 basis points as of Tuesday morning. However, just the fact that the upside is being tested is revealing in itself.
Some savvy observers have come to the conclusion that a 75 basis points increase is what is likely to happen on November 23. The OCR's currently at 3.5%. The same reasons these observers have come to that conclusion is resonating more in wholesale markets.
Take a look at the wholesale swap rate charts at the foot of this article. The two year swap rate hit 5% today for the first time since December 2008, a 14 year high. Back then the average bank two year fixed rate was 7.3%. OK, so December 2008 was unusual. The Global Financial Crisis was biting hard, regulators were worried about the fallout, and yields were falling fast. But the two year swap rate was also 5% in ... well, we don't know. It was probably never that low prior to 2008, certainly not going back to 2000 which is when our records start.
And therein lies a pointer. Interest rates in the 2009 to 2021 period are probably the anomaly. We are probably in a period where we are just "reverting to the mean". And the long-run mean (average) is probably well over 5% for wholesale rates.
We will have to get used to 'normal rates' being a lot higher than where they have been. And recognise that this is the level they move around at. No more 2.99% rates, maybe ever.
The CPI data out at 10:45am today (Tuesday) will probably induce a new shift higher in fixed mortgage rates. There has been a background but relentless set of increases recently, all small, and few as of themselves deserving special mention. But they add up.
There was another announced this morning, this one by BNZ, But it was only to take up the space already created by earlier shifts by its main rivals.
The table below sets the base for what is to come.
And you will see there is now only one rate across the whole market that is below 5%, the TSB one year 'special'. Every other rate is above that 5% base. You can't help thinking that it may only be months away when we are having the same conversation about "nothing below 6%". The pricing in this market is moving fast now. Recall it was only a year ago we were reporting rates under 3% for one and two year fixed terms, and 18 months ago main banks were offering 2.29% fixed rates.
One useful way to make sense of the 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 October 18, 2022 | % | % | % | % | % | % | % |
| ANZ | 5.50 | 5.45 | 5.65 | 5.75 | 5.95 | 6.85 | 6.95 |
 |
5.50 | 5.45 | 5.65 | 5.75 | 5.95 | 6.09 | 6.09 |
 |
5.49 +0.14 |
5.45 | 5.59 +0.04 |
5.69 +0.10 |
5.89 +0.20 |
5.99 +0.10 |
5.99 |
 |
5.45 | 5.39 | 5.65 | 5.89 | 5.99 | 5.99 | |
 |
5.45 | 5.45 | 5.65 | 5.75 | 5.75 | 5.85 | 5.85 |
| Bank of China | 5.25 | 5.35 | 5.45 | 5.65 | 5.85 | 5.85 | |
| China Construction Bank | 5.50 | 5.65 | 5.65 | 5.95 | 5.95 | 6.85 | 6.85 |
| Co-operative Bank [*FHB special] | 5.35 | 5.25* | 5.65 | 5.75 | 5.95 | 6.09 | 6.09 |
| Heartland Bank | 5.09 | 5.45 | 5.49 | ||||
| HSBC | 5.29 | 5.39 | 5.54 | 5.59 | 5.79 | 5.89 | 5.99 |
| ICBC | 5.35 | 5.25 | 5.35 | 5.45 | 5.69 | 5.89 | 5.99 |
 |
5.29 | 5.29 | 5.45 | 5.49 | 5.75 | 5.79 | 5.79 |
 |
5.25 | 4.99 | 5.45 | 5.49 | 5.59 | 5.75 | 5.75 |
Fixed mortgage rates
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Daily swap rates
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