ASB pushes its 2-year fixed home loan rate to its highest level in 14 years

Personal Finance / analysis

ASB raises carded fixed home loan rates, now the only bank with a 2-year rate over 7%. This comes as the bank raises term deposit rates for savers

4th Sep 23, 10:20am by David Chaston

At the same time ASB offered savers a 6% term deposit rate for one year and 18 month terms, it's also raising fixed home loan rates.

ASB is now the only bank to have a 'special' home loan rate above 7%. That is its highest since October 2009.

There have been a number of recent rises in home loan interest rates, and that has opened up some interesting variances - which will probably be very temporary.

The most obvious differences are with BNZ, which is the remaining main bank with unchanged and lower rates.

For example, the difference between ASB and Kiwibank for a one year home loan rate is now 46 basis points (bps).

Between ASB and BNZ, the two year difference is now 26 bps.

Both are unusual differences between main banks. "Be quick."

Differences to challenger banks, especially Heartland Bank, are even larger.

Banks will point out that wholesale swap rates have been rising globally. However, over the past two weeks or so we have had quite a sharp reversal back down in benchmark wholesale rates.

Obviously you should negotiate and shop around. Most banks will discount their carded rates if you have strong financials. You shouldn't need them but if you are uncomfortable negotiating, a broker can often be helpful. But be aware some brokers won't offer you the best over the whole market, only the banks they have approved connections to in their "lending panel." And clearly bank mobile managers are there to pitch their company's own product.

One useful way to make sense of the changed home loan rates is to use our full-function mortgage calculator which is 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 September 4, 2023	%	%	%	%	%	%	%

ANZ	7.09	7.25	7.04	6.99	6.69	7.09	7.09
	7.45	7.45 +0.20	7.15 +0.20	7.05 +0.16	6.85 +0.16	6.75 +0.16	6.69 +0.20
	7.39	7.19	6.95	6.79	6.49	6.49	6.49
	7.15	6.99		6.89	6.69	6.49	6.49
	7.19	7.25	6.95	6.89	6.69	6.49	6.25

Bank of China		6.99	6.89	6.79	6.59	6.39	6.29
China Construction Bank	7.19	7.09	6.89	6.75	6.45	6.40	6.40
Co-operative Bank [*FHB special]	7.09	6.89*	6.95	6.79	6.49	6.49	6.49
Heartland Bank		6.59	6.59	6.45	6.15
HSBC	7.19
ICBC	7.19	6.95	6.85	6.65	6.49	6.49	6.49
	7.39	7.25	7.04	6.89	5.99	6.59	6.69
	7.19	7.19	7.04	6.89	6.69	6.59	6.49

Fixed mortgage rates

Select chart tabs

Source: interest.co.nz

Source:

Daily swap rates

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Source: NZFMA

Comprehensive Mortgage Calculator

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27 Comments

by 1689 Baptist | 4th Sep 23, 10:31am 1693780263

I have a theory that for the OCR to have any meaningful effect on inflation, the average joe's mortgage rate needs to be pushed above the inflation rate. Otherwise it is more economic to borrow rather than save for your next big expenditure. I have just spent $30k on my house upgrades and it is in a mortgage top up. I'll be paying 6% interest but if I were to save for it like a good little boy, next year the cost will be 8% higher. Better to borrow than save. Mortgage rates are only just now going above inflation so it will be better to save than borrow from henceforth.

by K.W. | 4th Sep 23, 11:02am 1693782149

For the OCR to have any meaningful effect on inflation, the central bank rate should be above the inflation rate. This used to be known as the Taylor Rule. https://www.investopedia.com/terms/t/taylorsrule.asp

Which would be 7.7% according to GDPLive.

by HughJorgan | 4th Sep 23, 11:06am 1693782401

I respectfully disagree 1689. Inflation is measured over a very different basket of goods and there is zero asset inflation.

That $30k you just spent on your house, what’s the bet that would be cheaper next year AND you could have earnt interest in the meantime?

Inflation is measured over consumer goods like broccoli and petrol and you need to be careful how it frames your thinking around assets and capex.

by Murray Falconer | 4th Sep 23, 12:41pm 1693788114

Agree, it's like those that say you're losing having money on term deposit as inflation rate is more.

I say it depends on what you're intending to spend it on and the inflation of that specific item.

by Zwifter | 4th Sep 23, 1:25pm 1693790713

Correct but most here simply don't get it so I don't bother trying to explain why anymore.

by J.C. | 4th Sep 23, 2:57pm 1693796220

Agree, it's like those that say you're losing having money on term deposit as inflation rate is more.

Was discussing this with one of my normie mates. He said that the ol' rat poison is trading 5% above its inflation adjusted price in December of 2017 (approaching 6 years ago). He said this is good performance using official CPI data.

But he also said that if he took my conspiracy theory mindset - saying that the govt inflation metrics are BS - and real inflation is closer to 10-15% - then it's negative over the same period.

He has good points. But arguably the situation is far worse if it were NZD.

by Nzdan | 4th Sep 23, 11:31am 1693783913

Apologies to all the young recent home buyers who just purchased a home to live in, we overcooked the economy and now you're going to do the heavy lifting for us.

While we could look at other ways to counter inflation, such as universal compulsory Kiwisaver contributions, that sounds like hard work and we prefer the single lever mechanism.. Anyway, you young'ns should have studied macro-economics before taking out a mortgage you can no longer afford, everybody knew interest rates couldn't stay low forever.

by Chaosinflesh | 4th Sep 23, 11:42am 1693784533

We value the contributions your future plane tickets out of here will provide Air NZ's bottom line. Please exit in a calm and orderly fashion so as to not panic the incoming rest-home workers who will be replacing you - who have the good grace to realize their place in this world and recognize paying most of their income to rent our decades old investment property ensures our continued supply of sausage rolls, lattes and e-bikes, is their best way forward in this world.

And if you were stupid and had a family - well, that's on you. Perhaps try a little less hard in your next life.

Ciao.

by Nzdan | 4th Sep 23, 12:41pm 1693788093

W-w-w-w-w-wait.....w-w-w-w-w-where do you think you're going? Your frail old mother and father have been shoved into a home to rot, subject to abuse by the revolving door of migrant care workers on a backdoor trip to Australia.

by FSB | 4th Sep 23, 1:35pm 1693791318

Sorry to hear your parents are being abused 😭

by nguturoa | 4th Sep 23, 1:35pm 1693791338

The rates will be higher for longer. The pain has just started.

A million is still a lot of money.

by Averageman | 4th Sep 23, 1:56pm 1693792591

Agreed. While it seems not at 2% debt, reality is approaching faster than most would wish.

by Nellbell | 4th Sep 23, 1:57pm 1693792647

I so agree Nguturoa, a million dollars is an awful lot of money. Try saving it from a wage or salary.

by Zwifter | 4th Sep 23, 2:04pm 1693793083

You can't, the only way in this country for the average worker to make that sort of money was in property.

by K.W. | 4th Sep 23, 2:55pm 1693796149

In can be done in shares, but probably not on the NZX unless you got lucky with A2 Milk or something. The sooner the NZX merges with the ASX the better. Then Kiwi's might have a chance to diversify away from property. Even better, drop the FIF tax on international shares and encourage Kiwi's to go buy US shares. Just think of how much New Zealanders have missed out on by not buying shares like Apple, Google and Microsoft, because the last Labour Govt decided to implement a wealth tax on share portfolios. Then we wonder why everyone buys houses.

by NZValid | 5th Sep 23, 5:33pm 1693892015

Even better, drop the FIF tax on international shares and encourage Kiwi's to go buy US shares.

I respectfully disagree that. We need mum and dad investors money to improve NZ market instead of warming Wall street.

Investing in residential property is bad thing, money leaking's worse though

by ChrisOfNoFame | 4th Sep 23, 2:51pm 1693795869

Golly!

Is this yet more proof - as if any was needed - that the OCR is tired old tool that no longer works the way it was touted too (if indeed it ever really did!)?

Like I've said many times before - If you want to bludgeon inflation into submission and do it quickly and effectively - while making the claim we're all in this together and we're all doing our bit - RAISE TAXES!

At least that way Kiwis keep the money rather than handing it out to the faceless foreigners that fund our borrowing ... and is never seen, nor spent, in NZ ever again.

by Pragmatist | 4th Sep 23, 2:55pm 1693796133

Which taxes do you want increased exactly?

by Market Interest | 4th Sep 23, 4:02pm 1693800153

_{Preferably someone else's.}

by Pragmatist | 5th Sep 23, 7:34am 1693856070

^{Lol, isn't that always the way.}

by 1689 Baptist | 5th Sep 23, 9:44am 1693863877

Don Brash believes it should be the fuel tax. Not a bad idea when you think about it.

by K.W. | 4th Sep 23, 3:01pm 1693796494

No, its proof that the Reserve Bank is still refusing to use the OCR as it was designed to be used, because its captured by the political party who appointed the guy in charge. Independence is long gone, now its about not doing anything that might get you fired.

In the meantime we get to enjoy domestic inflation running at 6%+ for almost 2 years now.

Raising taxes won't work, because all that will do is drive people to Australia. Then the entire economy really will crash.

by TronMVP | 4th Sep 23, 6:37pm 1693809449

Inflation is falling, and will continue to fall even with the OCR remaining at 5.5%. This is because inflation has many causes which have no relation to the OCR. The Taylor Rule is a concept and not a rule (despite the name) and I doubt that there have been robust studies which have shown its validity in New Zealand.

by K.W. | 4th Sep 23, 9:02pm 1693818158

Its only falling because imported inflation is falling, and that is something that the RBNZ has no control over. That is the US Fed doing its job. They have their OCR at a rate (5.5%) higher than their inflation (3%), and are still saying they will raise the OCR further to bring inflation under 2%.

Meanwhile NZ domestic inflation has only dropped to 6.6% from 6.8% and has been over 6% for almost 2 years now.

by Kunsgnos | 5th Sep 23, 5:55am 1693850159

This is the strangest comment I've seen on here for quite some time. How will increasing taxes solve this? You need to go back to the drawing board. The main reason we are in this mess is because of the way money is created. New money is created when a loan is taken out and is destroyed when that loan is paid off. When there is more borrowing than saving then we get inflation because there's now more credit in the system than before, chasing a similar number of products and services.

The monetary system is broken beyond repair and requires a ground up rebuild. 97% of money is debt. If we all paid our debts off then the money supply would shrink, and we would get another great depression. But the opposite happens if we all decide to borrow money, like during a real estate bubble. This system has an expiration date.

by WestieAJ | 4th Sep 23, 4:40pm 1693802444

Lagging Karma. But its still gunna kick you right in the face.

by Jackjack | 4th Sep 23, 5:51pm 1693806665

With no change in wholesale rate, banks are increasing their margin to make more money. Well done ASB. Look forward another record profit for next financial year. Home borrowers’ blood is very tasty