More home loan rate rises - in the middle of an ongoing global trend up

Personal Finance / analysis

Kiwibank is the next major bank to raised interest rates for both borrowers and savers, but because we are in the middle of a sharp global shift higher, New Zealand banks may have to move up again in the coming week or so

21st Oct 22, 9:31am by David Chaston

The next out of the blocks to sharply raise home loan rates is Kiwibank.

And that only leaves ASB and BNZ to make their announcements, which are very likely to come later today.

Kiwibank's changes position it with minor rate advantages. These are a 10 bps advantage for a one year loan, just 4 bps for a two year loan.

However for 3, 4 and 5 years they have pitched their card higher than Westpac.

Kiwibank has raised term deposit rates at the same time, and here their new six month rate of 3.75% is higher than ANZ's new 3.60% rate and Westpac's new 3.70%. Kiwibank has a 4.00% nine month rate matching Westpac but lower than ANZ's 4.10% rate for that term. Kiwibank's new 4.50% one year TD rate is above ANZ's 4.30% and Westpac's 4.40%, and matches TSB's latest update.

How long these rates - mortgages or term deposits - can hold at the current levels is a live and open question.

Overnight, global rates raced higher, especially the benchmark US Treasury rates. As the local influences in wholesale markets around how the RBNZ will react to the sticky and high inflation levels (especially the nontradeables) tend to fade for a while, these global rates are energising financial markets with a new upward impetus. That means our wholesale interest rate markets will feel the steel of these pressures and keep rising.

So the retail mortgage and term deposit rates changes we are seeing this week are reacting to 'yesterday'. There is still to come the reaction to 'today'.

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 21, 2022	%	%	%	%	%	%	%

ANZ	6.05 +0.55	5.99 +0.54	6.09 +0.44	6.19 +0.44	6.29 +0.34	7.19 +0.34	7.29 +0.34
	5.50	5.45	5.65	5.75	5.95	6.09	6.09
	5.49	5.45	5.59	5.69	5.89	5.99	5.99
	5.95 +0.50	5.89 +0.50		6.15 +0.50	6.29 +0.40	6.39 +0.40	6.39 +0.40
	5.99 +0.54	5.99 +0.54	6.09 +0.44	6.19 +0.44	6.19 +0.44	6.29 +0.44	6.29 +0.44

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	5.19 +0.20	5.49 +0.04	5.59 +0.10	5.65 +0.06	5.75	5.75

Fixed mortgage rates

Select chart tabs

Source: interest.co.nz

Source:

Daily swap rates

Select chart tabs

Source: NZFMA

Comprehensive Mortgage Calculator

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49 Comments

by tulips | 21st Oct 22, 9:38am 1666298306

The march towards 7% continues.

by Balanced Life | 21st Oct 22, 9:50am 1666299008

.. and a compounding interest rate calculator may tell one that 7% compounding interest over ten years doubles that money, that is for investing, and it would also calculate the same for debt.

After investing for 10 years at 7% interest, your $10,000 investment will have grown to $19,949 (or payable debt).

Do we still count on house prices doubling every 10 years to recover that debt? Hmmm...not so sure. Pay off the debt.

by lonewolfnz | 21st Oct 22, 3:09pm 1666318172

Having paid off a very substantial mortgage this year this makes me happy. Its basically an after tax guaranteed return of 7% going forward - pretty much impossible in this environment. Or to put it another way, the 7% I would be paying I can instead invest into equities etc at very cheap prices

by Rumpole | 21st Oct 22, 10:00am 1666299628

7% is the staging post for a cup of tea then it onwards and upwards 8% yes 10% possible.

by Advisor | 21st Oct 22, 10:23am 1666300987

The lot at ASB are the first of bank economists to see a 9.xx% rate appear in their crystal balls.

What can be done to pull the handbrakes on this unpalatable rise in costs - "Targeted support" from Robertson/Luxon? Price controls?

Meanwhile, Jacinda could go door-to-door hugging recent FHBs as part of her election campaigning.

by RickStrauss | 21st Oct 22, 10:30am 1666301458

Sounds reasonable.

Why should a handbrake be applied though? Surely it's a market not a welfare scheme.

by Advisor | 21st Oct 22, 1:10pm 1666311018

It is no secret that both major parties have vested interest in saving the housing market from collapse at "all costs". These costs are usually borne by low and middle-income earners, productive workers/businesses and young Kiwis.

by RickStrauss | 21st Oct 22, 1:02pm 1666310520

Time we stopped telling the young folk they should stand on their own two feet when the older generations have never been required to, eh.

by Future | 21st Oct 22, 2:17pm 1666315044

With equity vaporizing faster than spilt petrol on hot concrete it is no surprise that people will now be refinancing back down to Standard Rates. North Shore has Crashed more than -28%, and that's with a population of over 200K. Lets not mention Wellington, south Wairarapa etc etc.

Let's have another look at those Interest Rates shall we ? Kiwibank has more 7s than any other bank. Strange how this is never mentioned .

Standard Rates for Standard People.

https://www.interest.co.nz/borrowing

It's amazing what you see when you look a little harder.

https://www.youtube.com/watch?v=n5G0D1dRMoI

by lonewolfnz | 21st Oct 22, 3:10pm 1666318239

Not sure about the North Shore. We just had a 2 bedroom brick and tile crosslease sell next door for $1.1M - 18% over CV. We are in a nice area though

by Carlos67 | 21st Oct 22, 3:28pm 1666319290

Sounds like Campbells Bay type pricing, the cheapest house in the most expensive area.

by kiwimm | 21st Oct 22, 3:36pm 1666319800

You won't get moved to a standard rate unless you are looking to borrow more.

by Albert2020 | 21st Oct 22, 9:50pm 1666342220

You don’t get moved to a standard rate if you stay with your current bank and don’t ask to borrow more.

by Brock Landers | 21st Oct 22, 9:53am 1666299226

"This is the new normal for house prices"

"The government won't let house prices fall"

"The sooner you buy the better"

"They aren't making any more land"

"Your delay is somebody else's opportunity"

"Secure your future"

"House prices double every seven years"

"The best time to buy was yesterday"

by Retired-Poppy | 21st Oct 22, 10:13am 1666300386

Brock! Just to correct you, house prices double every ten years 🌈

😜

by Pa1nter | 21st Oct 22, 11:26am 1666304778

Lucky Brock's ignored that advice for that long.

by Brock Landers | 21st Oct 22, 1:24pm 1666311879

It's deeply flawed advice.

by taimaiakka0 | 21st Oct 22, 10:18am 1666300697

If any doubts contact : Tony Alexander (Economics speaker and writer)......Sorry Independent Economist :)

by keenaucklandobserver | 21st Oct 22, 10:19am 1666300749

Here's another one for real estate agents out there to use.

"Marry the property, date the rate. You can always refinance later."

Yeah, refinance to a higher rate...

by Balanced Life | 21st Oct 22, 10:47am 1666302452

"A rolling loan gathers no loss." ;o)

But still, I'd rather pay the debt off and keep saving for the next market crash.

by OldSkoolEconomics | 22nd Oct 22, 7:05am 1666375524

Yip..lifes for loving not gambling on investments and anxiety. Balance risk.. understand the boom bùst cycle and how it can help.There is a tried and true formula.

1. Get a good education and a decent job doing what you love. 2. Buy the house you need, with room to grow, where you need and at a sensible time in the boom bust cycle for a sensible price with sensible rates or deals (our first house was at the bottom of a curve with a cash back depoist scheme) 3. Pay down the mortgage at a fast but not stressful rate and avoid shiny things 4. Once mortgage is gone learn to invest wisely across multiple markets and ùnderstand risk and markets. 5. As you get to middle age enjoy your family as you can work less and spend more time on passions and work will become more of a hobby.

For best effect dont hang out with, listen to or compare yourself with the 'gamblers' or spuikers on the way but hang with like minded folk instead.

Easy as. Probably has a 99% success rate but more importantly minimal stress.

Work less. Play more. Enjoy life.

by AdamJay1990 | 21st Oct 22, 10:14am 1666300463

The gap between mortgage rates and TD rates is ridiculous. I guess we can thank the FLP for that...

by Independent_Observer | 21st Oct 22, 10:18am 1666300709

It's an 'investment in NZ' - aka paying dividends to foreign share holders while bailing out those holding too much debt relative to incomes.

by ACB | 21st Oct 22, 3:38pm 1666319929

Yes, using the interest.co.nz charts, the 2 year fixed mortgage of 5.6% is now back to late Feb 2015 levels where the 2 year swap rate was around 3.6%. Now, the 2 year swap rate is 5.2%...if banks were funding their mortgage books relative to swap, we'd be at 7%+ for fixed mortgages at the moment. So taxpayer subsidised funding via the FLP to banks to the detriment of term depositors/savers.

by Carlos67 | 21st Oct 22, 6:02pm 1666328558

That all ends in December. My TD comes out in Feb so plenty of time for a correction.

by Nzdan | 21st Oct 22, 10:23am 1666301013

( ͡🔥 ͜ʖ ͡🔥)

by Hastings | 21st Oct 22, 10:40am 1666302050

That little guy running up the stairs with no numbers. Guess what the piece of paper (scroll) inside his bag is saying? Ouch🤡

by bw | 21st Oct 22, 10:59am 1666303176

"Mortgage rates are high now, aren't they!"

No they aren't. They're slightly below the long term averages.

What is high though, by a factor of 2 or 3, of the RBNZ mandated CPI level of 1%-3%.

It would be a stretch to suggest that today's mortgage rates have to increase by a factor of 2 or 3 times, just to catch up to lagging monetary policy, but you just never know!

(NB: If we cross our fingers, maybe the CPI level will come back down to meet the OCR rate? Good luck with that!)

by spacecadet | 21st Oct 22, 10:55am 1666302919

Here is the US 10 year with regression channel back to 1986. Something has changed. Perhaps the bond market is reacting to the decline in globalization, the peace dividend evaporating, a lack of investment in energy and boomers leaving the workforce all causing a prolonged inflationary period? https://i.imgur.com/jMmbqzx.png

by King of the whiners | 21st Oct 22, 11:46am 1666305971

Thanks for that - it's probably the most significant graph in the financial world at the moment, and people would do well to heed what it means re:asset prices etc going forward.

by Small Kev | 21st Oct 22, 11:16am 1666304171

Watch out for the mortgage specials after New Years.

by Retired-Poppy | 21st Oct 22, 11:39am 1666305550

What, like a floating rate special of 8% with a 1% cash back?🥶

by Future | 21st Oct 22, 1:51pm 1666313493

I think he misspelled. I believe there is an extra e needed at the end of a certain word starting with m.

by kpnuts | 21st Oct 22, 11:26am 1666304787

so when LSP goes and a.75% increase in November --....... thats goign to be some serious challenges for anyone due to come off a 2year + fix from December onwards -- which i understand is a hefty number of people -

Now the prophet has been reincarnated -- Can we ask are we heading to 9% rates next year ??

by jeremyr | 21st Oct 22, 11:35am 1666305354

Yes. I think so. I think we will see > 10%.

by Future | 21st Oct 22, 1:54pm 1666313687

As the Apprentice for The Prophet I can Confirm what is written below and in the scroll.

10% Interest Rates Next Year, Guaranteed !

by WellingtonInvestor | 22nd Oct 22, 1:13am 1666354407

I heard ASB were predicting 9% rates. But if they go up to that, it will crash house prices.

by Chairman Moa | 21st Oct 22, 11:43am 1666305820

If NZ Housing market was the Titanic, this is where the Jack said “Promise me you’ll survive, that you won’t give up, no matter what happens. No matter how hopeless.” the interest rate is...

by RickStrauss | 21st Oct 22, 11:56am 1666306592

"I'm frying, Jack"

by Zen20 | 21st Oct 22, 11:52am 1666306376

Property Ladder or Rate Rise Escalator??

by IT GUY | 21st Oct 22, 12:09pm 1666307373

Mortgage rate rises mean some bidders could lose deposit (afr.com)

great article WRT how much less a familly on $200k income can borrow now vs 6 months ago in Aussie,

SPOILER Alert - a lot less..........

by HouseMouse | 21st Oct 22, 12:44pm 1666309447

I mentioned this the other day, but it hasn’t been corrected and surely it’s important in terms of financial advice????

’But break fees should be minimal in a rising market’

by Nifty1 | 21st Oct 22, 1:03pm 1666310597

Doesn't sound like advice, just a generalisation...?

by HouseMouse | 21st Oct 22, 1:54pm 1666313686

Either way, it’s way out of date

by Albert2020 | 21st Oct 22, 9:51pm 1666342292

It’s accurate so what’s the issue?

by Cur8or | 21st Oct 22, 1:51pm 1666313460

Kiwibank has been nationalised, right?

by 2 Tooth Bora | 21st Oct 22, 3:13pm 1666318393

Property correction is only going to get worse.

The following article popped up on the front page and quickly disappeared.

https://www.stuff.co.nz/business/property/300718271/a-global-houseprice…

Government and finance industry should have let the debt levels correct after the GFC, but did the very opposite, throwing fuel on the fire. Now many peoples lives are stuck with a home worth less than they paid and it's predicted to stay that way for many years and try to pay of that tsunami of debt while inflation rages.

If high unemployment occurs as many Economists are predicting, which makes sense as people are going to have considerably less money to spend in the Economy, there will be lot of very sorry suckers.

by Averageman | 22nd Oct 22, 12:48pm 1666396098

Exactly.

But leverage up maaaaaate. You cant go wrong maaaaate. Bail me out maaaaateeee. Generate me some fees maaaatttteeeeee.......

by jeppy | 21st Oct 22, 5:09pm 1666325354

Fundamental economics is in the drivers seat now racing to the new norm, chasing up behind is Orr on his moped wondering what the hell happened!