Home loan rate changes are extending, even among banks that have just adjusted recently.
BNZ changed its rates Thursday, and have changed them again today (Friday), after their main rival ANZ also changed all its rates.
BNZ has now extended its cuts all the way out to its five year fixed rate offer.
As a result, among the major banks, BNZ now has the lowest rate offers for all fixed terms of 18 months and longer, matched on some, and on their own for 18 months and 3 years fixed.
Also changing their mortgage rate card has been SBS Bank, who announced small rate increases for all terms out to two years fixed.
Challenger banks offer lower home loan rates than almost any main bank, the notable exceptions being ASB and Westpac's five year rates.
We are likely in for a new period of rate reductions, if the wholesale rate track is any indication. Swap rates fell sharply yesterday and are expected to move down again today. If they stay down, that could open the door to more cuts.
But banks will be taking mood temperature in the run up to the next RBNZ rate review due on February 22. The wholesale rate falls are being driven by international pressures on the basis that the US Fed and ECB are nearing the end of their rate hiking cycle and the pressure is easing from those. Market guessing on whether a recession is coming, and if it does, how hard the 'landing' will be, is also part of this new rate positioning.
But those international shifts essentially rely on falling inflationary trends. It isn't clear New Zealand is getting the same trends to the same extent, even if there are some tentative signals. The question is whether the RBNZ thinks those lower signals will embed here. Around the world, tight labour markets are making the assessment harder in this business cycle. And because this is election year and policy changes by the RBNZ close to an election are usually off the table, we might see the RBNZ push ahead with another chunky rise early in the year so they don't have regrets about the OCR level as October 14 gets closer.
Looking over their shoulders will be term deposit savers. If they think rates may start falling, some may be tempted to lock in 'longer' TD terms now.
BNZ hasn't changed its term deposit rates yet, but others have (including SBS Bank and TSB). Almost all TD rate changes are still increases.
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 February 3, 2023 | % | % | % | % | % | % | % |
| ANZ | 6.60 | 6.54 | 6.49 | 6.45 | 6.59 | 7.19 | 7.09 |
 |
6.84 | 6.84 | 6.79 | 6.79 | 6.69 | 6.59 | 6.49 |
 |
6.54 +0.05 |
6.54 +0.05 |
6.45 -0.06 |
6.49 -0.10 |
6.59 -0.10 |
6.59 -0.20 |
6.59 -0.20 |
 |
6.50 | 6.49 | 6.49 | 6.79 | 6.79 | 6.79 | |
 |
6.59 | 6.59 | 6.69 | 6.79 | 6.69 | 6.59 | 6.49 |
| Bank of China | 6.15 | 6.25 | 6.35 | 6.35 | 6.55 | 6.65 | |
| China Construction Bank | 6.60 | 6.54 | 6.64 | 6.74 | 6.84 | 6.85 | 6.85 |
| Co-operative Bank [*FHB special] | 6.39 | 6.29* | 6.39 | 6.59 | 6.69 | 6.79 | 6.79 |
| Heartland Bank | 6.14 +0.25 |
6.15 +0.16 |
6.05 | 5.95 | |||
| HSBC | 6.44 | 6.44 | 6.59 | 6.69 | 6.79 | 7.29 | 7.39 |
| ICBC | 6.29 | 6.25 | 6.35 | 6.45 | 6.65 | 6.85 | 6.85 |
 |
6.59 +0.20 |
6.59 +0.20 |
6.49 +0.15 |
6.59 +0.05 |
6.59 | 6.65 | 6.69 |
 |
6.29 | 6.29 | 6.39 | 6.49 | 6.65 | 6.75 | 6.79 |
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28 Comments
Called it.
The multiple of interest rate increases in most developed countries was very large, and in many areas, from a base where they had sat for several years.
A pullback was guaranteed. Given how quickly rates shot up, I'm surprised anyone expected a slow measured retreat.
There's really only so much they can do, and only so much they need to. The market, as always, is in the driver's seat.
USD weakness is a huge driver, we're now at 65 c vs 55 not so long ago. We'll likely be back above 70 before too long. A strong NZD covers all manner of inflationary sins.
The other thing to keep in mind is the psychology of loss, i.e. with respect to house prices, a given decline in the value of ones house is disproportionately more upsetting than the positive feeling caused by a comparable gain. I.e. the disinflationary dynamic attributable to wealth affect is assymetric, skewed to the downside.
The other thing to keep in mind is the psychology of loss, i.e. with respect to house prices, a given decline in the value of ones house is disproportionately more upsetting than the positive feeling caused by a comparable gain. I.e. the disinflationary dynamic attributable to wealth affect is assymetric, skewed to the downside.
Beautifully delivered. RJN. I sense we connect and share a similar understanding. Unfashionable ideas that get little resonance at the BBQ or around the water cooler.
JC,
Otherwise known as loss aversion and I don't think it is at all unfashionable, but most people have better things to talk about round the BBQ.
Study after study has confirmed that people hate losses much more than they value gains, over twice as much in fact. Richard Thaler wrote this in his book on Behavioural Economics-Misbehaving; "The fact that a loss hurts more than an equivalent gain gives pleasure is called loss aversion. It has become the single most powerful tool in the behavioural economist's arsenal".
OCR only directly affects the very short terms, swaps rule the longer terms.
It could be rather expensive to refix for a year or two for the rest of the year, but still work out cheaper in the long run than taking a slightly lower rate longer fix only to see rates plummet late this year, early next year.
People had the best part of a year to refix at lower rates. If you were paying attention on here, the writing was on the wall from Feb 2022 onwards. I cannot understand the touted 60% of mortgage renewals last year and there is still 50% renewals this year? That is a lot of people on very short term fixes that should have gone at least 3 years. The number of people who should be needing to refix this year should have been tiny, The RBNZ were signalling rises all of last year.
Yep, which is why we broke and refixed for 2/3/4 years mid 2022. Its hard to predict exactly when the rates will peak and start dropping, but i'm reasonable confident it'll be in that window, and if I'm wrong and the peak isn't till 2026, at least we will ease into new rates in manageable chunks instead of one massive kick in the whatzits.
No, they are simply responding to the market, Swaps have been declining at the longer end quite quickly, they are simply passing that through. As they will when swaps increase at some point in the future.
Banks are simply arbitragers.
They "buy" money from various sources ( credit swaps, customer deposits, etc), add margins for overhead, risk and profit, then "sell" that to us punters in the mortgage markets.
Comes in tandem with a rebranding exercise?
I see Property Investors are now calling themselves Property Businessmen/women. Underneath the hood, just as with interest rates, nothing has changed. The massive distortions we have in our property market are still there. The World may be in an entirely different economic space to what it was the last time we went through this exercise 50 years ago, but people are just the same, and will react just the same.
One hidden logic of the bank rates drops, I think is banks are in fight to keep existing customers. With dropping house prices, and dropping new lendings, whoever keeps their customers, keeps market shares too.
I think we are in a "watch what's next" phase now, as interest rates can go both ways still.
Maybe, but a million ain't what it used to be. House prices will probably continue to drop, at least in real terms, until they are more sustainable. I'd expect nominal prices to flatten out from about here (assuming interest rates have peaked) while wages continue to catch up over the coming years.
The fact that housing has been shown not to be a one-way bet (shock horror) should cap any major gains in the next decade or so, until memory fades, as it always does. Recent policy changes, if sustained, should also have a persistent, dampening effect. Hopefully we can keep our political s@#$ together in the longer run to prevent the rediculous market dynamics we've just lived through from resuming.
You are assuming other investment categories performs better than property market. but this time, all investment category suffers loss which doesn't make property market particularly worse than others.
for inexperienced investors and first home buyers, it might be very scary experience. for me, it's not nice but all is expected.
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