The out-of-cycle hike of its floating home loan rates by Kiwibank comes in response to two pressures; its low earnings, and that the Co-op Bank has taken its mantle for this type of mortgage rate

Kiwibank has increased its variable home loan and revolving home loan rates by 10 basis points to 5.75% and 5.80% respectively, effective Monday, February 23 for new clients, and Monday, March 9 for existing clients.

This narrows the advantage over the bank's main rivals Kiwibank has had for the past five years while they offered a notably lower variable rate.

Here is where the new Kiwibank advantage on floating rates has settled to;

Kiwibank's advantage has gone from double-digits to mostly small single digits, and is now largely irrelevant.

Clearly, if you are looking for a low floating rate, it is hard to go past the Co-operative Bank's current 4.99%. Kiwibank's previous 5.65% also came nowhere near that.

The out-of-cycle rises is probably not surprising. Kiwibank's earnings are still well below major rivals.

Further, it is inhibited by driving most of its mortgage origination through broker channels. Including the NZHL channel, this means likely about 90% of its home loan lending requires the paying of broker fees. That channel helps with volume, but crimps earnings in a serious manner.

Meanwhile, Kiwibank has raised its online call savings rate by 25 basis points to 1.50%. But this still leaves it lower than the directly comparable BNZ rapid saver rate of 1.70%.