With the shift lower by the last major Aussie bank now complete, we look at whether it is better to take the new lower short home loan rates, or go for the much lower longer term rates

BNZ is the last of the main banks to trim fixed home loan rates, taking its six month and one year carded rates down in the same manner as ANZ who started the recent realignment.

So, where has the market ended up?

After the changes of the past 12 days, started by ANZ on May 2, all the big banks are back in line. The variation between them in the hotly-contested space of fixed rate for 1 year and less, is again very minor. Perhaps Westpac is slightly out of line being +10 bps higher than the mid-point.

But Kiwibank seems to have successfully occupied the 6.99% rate level alone for a one year carded offer. It is there with TSB and the Bank of China as the other two challenger banks. Heartland's online-only no-mortgage-broker 6.89% is the only better rate.

And Westpac is making a play at the three year fixed rate position, offering 6.39% and it basically has this position to itself. That rate is -60 bps lower than Kiwibank's one year carded offer. SBS Bank has a 5.99% three year rate offer. It would be interesting to know how much attention these are grabbing.

By our figuring, taking 6.39% for three years now instead of the 7.14% offered by the other big Aussie banks for one year, and trusting rates will be much lower after May 2025 and 2026, means for a $450,000 mortgage that will require repayments at $2,812/month now versus the $3,036/month by taking the one year option. That is a saving per month of $224. Over the first year, that builds to a $2,688 saving by taking the three year rate now. You are guessing that rates in May 2025 will be lower. A two year fixed rate would have to fall to 6.00%, or that for the one year rate for each of those two out-years. That is down -115 bps, and if that happens you are no worse off taking the savings from the 3 year rate now, than achieving the future 6% one or two year rates. (You wouldn't be ahead until those future short rates fell to 5.9% or lower.)

What's the chance? Worth taking the gamble?

Two additional points are worth making. First carded rates are less relevant these days. Bank apps offer good discounts to existing borrowers who are ready to roll over their interest rate contract. A few simple clicks and you are done, probably with a lower-than-carded rate. That 'simplicity' discourages competition, especially when you feel you got a 'good deal' from a 'lower rate'. Please note the current discount offers from these apps in the comment section below if you know them.

And secondly, the shift short is raising the power and influence of the RBNZ's monetary policy to affect household budgets. The rush short means far more loans will be affected by RBNZ rate revisions when they come. Today markets are pricing in about two -25 bps OCR cuts in 2024. The OCR does have influence on wholesale pricing out to about 12 months, much less for longer terms. (Perhaps some of the recent retail rate falls can be attributed to the shifts already at the wholesale level.)

BNZ did not announce any changes to its term deposit rates with today's home loan rate changes.

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. Break fees will be minimal in a rising market. But they become important in a falling market however.

Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment. Update: adds SBS Bank change.

Fixed, below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at May 14, 2024	%	%	%	%	%	%	%
ANZ	7.25	7.14	6.89	6.79	6.65	7.34	7.34
	7.24	7.14	6.89	6.75	6.65	6.49	6.39
	7.24 -0.05	7.14 -0.10	6.89	6.79	6.65	6.55	6.55
	7.25	6.99		6.79	6.65	6.55	6.55
	7.29	7.24	6.95	6.75	6.39	6.39	6.39
Bank of China	7.09	6.99	6.75	6.65	6.49	6.39	6.39
China Construction Bank	7.19	7.09	6.89	6.75	6.49	6.40	6.40
Co-operative Bank	7.29	7.14	6.99	6.79	6.65	6.55	6.55
Heartland Bank		6.89	6.69	6.55	6.35
ICBC	7.19	7.05	6.79	6.75	6.59	6.49	6.49
	7.35	7.14 -0.10	6.99	6.69	5.99	6.19	6.19
	7.39	6.99	7.19	6.75	6.65	6.59	6.59