Westpac NZ cuts five-year mortgage rate giving it the lowest advertised rate for that term from a bank, also cuts savings rates

Westpac has cut its five-year fixed-term mortgage "special" rate to a market leading 4.99%. However, at the same time Westpac has cut a series of term deposit rates.

Effective Friday, Westpac has shaved 60 basis points off its five year "special" mortgage rate dropping it to 4.99% The next best advertised five-year rate from a bank is the HSBC "premier" 5.29%. Borrowers taking up Westpac's special require a loan-to-value ratio of less than 80%.

Westpac has also sliced 60 basis points of its standard five-year mortgage rate, dropping it to 5.49%.

Whilst there's good news for borrowers, the news from Westpac for savers is bad. The bank has cut a series of savings rates by up to 45 basis points. Full details of the reductions are in the table below.

Westpac term deposit, term PIE & MDS rate table

Term

Interest Frequency

$5,000 - $5,000,000

 

 

Rate

Change

7 – 13 days

At Maturity

0.35%

Nil

14 – 29 days

At Maturity

0.35%

Nil

1 month

At Maturity

0.75%

Nil

2 months

At Maturity

1.25%

Nil

3 months

At Maturity

2.65%

Nil

4 months

At Maturity

2.95%

Nil

5 months

At Maturity

3.00%

Nil

6 months

At Maturity, Monthly, Quarterly or Compounding

3.25%

Nil

8 months

At Maturity, Monthly, Quarterly or Compounding

3.20%

Nil

9 months

At Maturity, Monthly, Quarterly or Compounding

3.30%

-0.05%

12 months

At Maturity, Monthly, Quarterly or Compounding

3.45%*

Nil

18 months

At Maturity, Monthly, Quarterly or Compounding

3.45%

-0.10%

2 years

At Maturity, Monthly, Quarterly or Compounding

3.50%

-0.15%

3 years

At Maturity, Monthly, Quarterly or Compounding

3.65%

-0.15%

4 years

At Maturity, Monthly, Quarterly or Compounding

3.60%

-0.40%

5 years

At Maturity, Monthly, Quarterly or Compounding

3.65%

-0.45%

All carded, or advertised, term deposit rates for all financial institutions for terms of less than one year are here, and for terms of one-to-five years are here.

Term PIE rates are here.

See all banks' carded, or advertised, home loan interest rates here.

And here is the full snapshot of the fixed-term mortgage rates on offer from the key retail banks.

below 80% LVR 6 mths  1 yr  18 mth  2 yrs   3 yrs  4 yrs  5 yrs 
as at July 9, 2018 % % % % % % %
               
4.99 4.29 5.15 4.49 4.85 5.85 5.99
ASB 4.95 4.29 4.39 4.49 4.79 4.95 5.59
5.35 4.29 5.05 4.49 4.85 5.89 6.09
Kiwibank 4.99 4.19   4.39 4.85 5.19 5.39
Westpac 5.25 4.29 5.15 4.49 4.85 5.89 4.99
               
4.80 4.24 4.45 4.49 4.85 5.39 5.59
HSBC 4.85 3.99 3.99 4.19 4.69 4.99 5.29
HSBC 4.99 4.19 4.49 4.49 4.85 5.39 5.55
4.85 4.24 4.35 4.49 4.85 5.55 5.69

In addition to the above table, BNZ has a fixed seven year rate which is 6.15%.

And TSB still has a 10-year fixed rate of 6.20%.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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70 Comments

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12

its time savers starting withdrawing funds to invest elsewhere

But that would involve taking on some level of risk - a horrible four letter word for most here. Particularly with economic armageddon on our doorstep.

True, but risk vs return is what matters.

There is risk involved in a term deposit, as with shares or property or any other investment.

The question is whether the returns justify the risk. Is the investment sitting somewhere along the Efficient Frontier?

Hi BuyLowSellHigh,

If you're too risk-averse, you might lead a very dull life.

If "economic armageddon" really is on our doorstep - then I'd much rather have tangible/physical assets than paper assets.

But despite your desire for the economy to collapse, BLSH, I think you're mistaken.

By the way, why don't you cut your BLSH acronym to, simply, BS?

TTP

Heh, this should be fun. popcorn.gif :)

Just wondering how much to stock up. Will it be a one hour show or longer?

With TakingThePiss in one corner and BLSH in the other corner... who knows. Could go the full 15 rounds.

Bloody hell, might as well get my sleeping bag

What is the world coming to? Two of the main spruikers fighting. What next a tag team with the Birdy?

In the animal kingdom those are signs of an apocalypse

TTP is too slow to realise BLSH was baiting the "Sky is falling" crew. Nothing to see here.

The latest REINZ report left BuyLowSellHigh embarrassed and bruised. It fell well short of his forecast for a 1% YOY increase for Auckland. Also, the Tauranga median dropped to $635,000 from $655,000 in one month. It might be time for him to stop pedaling that Sunny Papamoa water?

I'm almost certain I didn't predict a 1% YOY increase for Auckland for July. My prediction was 1% gain for December 2017 edit: 2018 YOY.

Also, the REINZ stratified index had Auckland up 1.6% last month!

Sent to my by a friendly RE agent.
Pertaining to the eastern suburbs

Median Sale Price in NZ$millions(volume sold)

Suburb July2018 June2018 July2017
Orakei 1.30 (9) 1.30 (9) - (2)
Mission Bay 1.31 (5) 2.15 (7) 1.86 (5)
Kohimarama 1.19(8) 1.48 (9) 1.50(11)
St. Heliers 1.62 (15) 2.15 (13) 1.80 (17)
Glendowie 1.50 (8) 1.68 (6) 0.985 (1 4)
Meadowbank 1.30 (7) 0.92 (8) 1.21 (10)
Glen lnnes 1.03 (8) 0.955 (8) 0. 78 (8)
Saint Johns 1.08 (6) 0.89 (5) 0.33 (8)
S tonefields 1.38 (10) - (4) 1.24 (9)

Good stuff. I use these -

Median price stats by city - https://www.interest.co.nz/charts/real-estate/median-price-reinz

Median price by suburb - https://www.landlords.co.nz/housing-statistics/

I forgot about landlords.co.nz, yes that's excellent data! Wow check out the eastern suburbs graph. Reminds me of bitcoin.

I'm exaggerating of course, but it looks to me like a sharp decline from it's peak. This was an area of concentrated foreign buying.

Got the same email from someone called Ryoxi Wang at Ray White. It went straight to the bin, as it’s useless info. It needs individual CV and sale price to be worthy of a market indicator. I use the Core Logic supplied by my bank. It’s 0.86% above the 2017 CV as at 12/8/18. BTW 13b Melanesia Road sold for over $4 million this week. The CV is $4.1 million, although not sure how accurate that was given that they just built a new house in front of it. Save your Pounds Sterling.

My apologies BLSH,

You're a scholar and a gentleman.

TTP

Hi tothepoint
I think you may have missed this bit:

The guy is poorly informed and dimwitted. Shameful excuse for a spruiker. I won't be responding, as taking a shot at someone with his mental capacity could be considered a hate crime.

or not. I guess BLHS is correct.

.

Hi TTP,
I think you misunderstood BLSH's comment - Don't think that he has desire for the economy to collapse.

Indeed. I thought BLSH had changed course - but accept he was being satirical.

As above, he's a scholar and a gentleman.

TTP

I come from a low (by NZ standards) socio-economic background. I'm trying to reach middle class from the ground up. I have nothing to fall back in, and no family that could take me in if an investment went poorly.

I realise I need to take some risk to get ahead, but my appetite for it can't be as great as someone whose mummy and daddy had steady jobs and drove them to school.

This situation calls for barbell investing - 90% very low risk + 10% extreme risk
https://vantagepointtrading.com/nassim-talebs-barbell-portfolio-investme...

Pretty much what I'm doing - my Kiwisaver (which I'm not touching for FHB purposes) is very high risk. My house deposit money is in low risk term deposits.

Your Kiwisaver won't stop your decline to the low class - until you're 65 anyway. Shares are only considered high risk. Extreme risk is venture capital/start-ups/new crypto-currencies etc - essentially anywhere that has the potential to make a 100x gain.

My retirement fund is more so I don't starve to death when I'm old. There will be no pension when I'm 70.

saving_for_auss, even Greece has a pension for the elderly.

Wake up and smell the roses. Pensions are being cut down all across the world, and the age limits are being pushed up and up.

Maybe there will be a pension when I'm old. It will kick in at age 80 and be half what the current one is. That's the best case scenario.

Just a thought to help,
You might like to put some of your low risk deposit money in active or growth managed funds so as you compensate for the low return from TD or saving accounts...

In fact, while money in low risk savings seems to be incrementally growing however, it is losing its value and most of its return is eaten out by inflation.

it is useful to ask a financial adviser.

Eco Bird, whilst your recommendation has some rear vision truth to it, for the time being, its as ripe as this debt driven ponzi. Like property, equities are hovering at historic highs. Kiwisaver funds values can tank too which is why members can personalize their Kiwisaver risk weighting. I find more logic in transferring funds out of high risk growth funds in this climate. One can always dive back in when things look like they couldn't get any worse. Best time to buy in.

You say that low risk investments with an "incremental return" are eroded by inflation. Once upon a time, this was indeed true. What's changed is the recent explosion of cheap finance funnelled into mass more efficient overproduction. By in large, I think wouldn't take much to tip the Global economy into another more prolonged deflationary scenario.

Are you in Kiwisaver?

My kiwisaver returns were the following after fees and fund charges before PIR tax:
1 year 16.7%
3 years 12.04% pa
5 years 13.08% pa
~8 years 13.25%pa

They are solid compounded returns adjusted for inflation
In fact, my Kiwisaver annual $$ return exceeds the entire rental returns for less than the quarter of the invested capital .

I am sure I did tell you all that at some stage.

So that leaves TD in its dust by miles.

BTW, you would have got similar or a bit higher returns for funds invested in the NZX50 in the last 4-5 years ( including dividends and imputation credits).

I transferred my Kiwisaver from Growth to cash in January. Mine returned 10.02%pa (after tax/fees) for five years. Previous to that I was in conservative. Your returns are certainly impressive and like you say, exceed TD rates ;-) I have held funds with Rabodirect for some time too.

Life's not always about having term deposits. It's just at this ripe stage of the cycle, I think it should be.

I might have been a little hasty to dismiss you as a Moron. Having a Kiwisaver backstop to support your speculative property adventures is worthy of note :)

Once and for all , you need to understand that long term property investors are not Speculators or speculative property adventurers RP. there is more speculation in investing in Productive Assets like shares and business than Houses ...

If you really are around 52 - 53 years old ( even if you are indeed older) , then I suggest that you move your funds into one of the super performing KS funds like Milford Asset KS Active Growth Fund or Ion ... etc and sit tight for few years on that - you might thank me for this one day.

Eco Bird, thanks but I will wait for the debt driven carnage before I switch any funds back to growth. Like you, I've also enjoyed some double digit fund returns. I've just chosen to lock them in. I'm in less hurry than the many leveraged speculators that litter our fine land. I've always accepted that genuine long term investors are not speculators. Where we might differ in opinion is that many speculators have been caught out, first by legislative change, now by this flat to declining market. They also call themselves long term investors (reluctant Landlords) hoping one day some bigger fool will come along.

Hi Eco Bird,

That's sound advice: you've done your best.

But as the time-honoured proverb says, "You can lead a lame horse to water but you can't make it drink".

TTP

TTP, yes this proverb is true. The trough has been good to me. However, in stagnating times, I know when to stop drinking before the sun turns the stagnant water toxic :-)

Like many commentators have suggested, its high time you practiced some foresight.

Shock news: assets went up in a bull market

Where?
Most people consider banks(rightly or wrongly) to be very safe.Outside of that options for many are few.
Oh i know...........HOUSES.

You mean to a different bank because these guys look a bit shaky?

Thanks Andrewj.

I said it a few months ago and the 'flip flopping' from their spokespeople over the last few months has done nothing to provide me with a change of opinion. They still remain my favourite candidate for being the first bank to make a trip the government for a hand-out.

"1992: Westpac recorded a 1.6 billion dollar loss, which at the time, was the largest loss for an Australian corporation. In this environment, the Bank dismissed staff and raided superannuation to sustain its viability. In the process, WBC came close to insolvency."
Better watch those Kiwsaver balances then! This time, there mightn't be a Packer to save them....

Sigh.. the banks don't hold your kiwisaver funds/investments. They are held by a trustee. Banks cannot raid your kiwisaver investments, they can only invest them badly (Including in their own bonds and cash accounts.. bit of a conflict of interest) and charge you excessive fees.

Lending and deposit rates are again hovering near 60 year lows. The use of cheap money adrenaline to protect property asset prices (banks lending book) is now paramount. This property ponzi is just too big to let fail. The only thing is however, Westpac recently admitted this method of stimulus will soon no longer work. Then what?

Yes, it's cheaper money but, banks lending criteria is being constantly re-evaluated towards tightening.

If the day arrived whereas floating rates are say 3.5% and deposit rates are say 2% and asset prices are falling, term deposits still provide a positive return.

Yeah-yeah I know, the mortgagor will quickly argue that in troubled times, banks aren't safe for depositors. The mortgagor should be reminded that troubled banks morph into terrible Landlords in times of trouble too. Banks look after themselves. In times of trouble, those who win are the ones who lose the least.

I'd agree with them, and if i was that risk adverse; to avoid the OBR risk, and to stop giving them money to lend out to perpetuate the housing ponzi, I'd probably put my money in Govt bonds, either directly, or a govt bond ETF like the SPDR S&P/ASX Australian Bond Fund. Or choose a local infrastructure/utility that has bonds on issue like Meridian.

RP
While I find your comments about how excessive credit and how banks have channelled that to real estate, has inflated property values in an unsustainable (or even if it is sustainable then it is still unproductive and not beneficial to the society in any form) convincing, I find it distasteful that you have closed any disagreement with your opinion on bank deposit as it being from "mortgagor".
In a country where banks lending is primarily to residential properties, the argument between real estate VS bank deposit is pointless in my opinion. And bank depositors are investing in the ponzi, just not getting the same returns as mortgagor. So if the argument is from the point of view of "risk and return", the mortgagor (as you call them) have already won the battle (except for those who are extremely greedy and stupid and over leveraged), even if property values reduce.
However if your argument is how participation in this activity is counter-productive to NZ society and this nation's future, then the answer is surely not to deposit money in the banks who will just inject it into property. As far as risk-free goes, all finance models consider government bonds to be the definition of risk free.

Believer1980, in this instance, when I referred to a mortgagor, I was referring to today's overleveraged speculator. Apology for not making that clear. I suggest for depositors to mitigate risks of small % losses in an OBR event, they could spread deposits amongst the strongest major banks. Surely they won't all fail!

No they won't fail precisely due to OBR, however bank creditors i.e. depositors like yourself ...

Simo, OBR is explained here :) https://www.rbnz.govt.nz/faqs/open-bank-resolution-policy-faqs

As a depositor, I'm comfortable with the risks associated with OBR. Shareholders and other unsecured creditors would be peeved in an OBR event. Sure, it would be nice to see a deposit insurance introduced if things go belly up.

Gareth. many thanks for reposting that link but you've just scared the bejesus out of me in doing so!

Thanks Gareth. Rabodirect cover some funds of mine under a Rabo Netherlands parental guarantee. From 1st May 2015, new deposits being transferred in from another bank are not covered by this as the NZ operation is now stand alone. As long as the principal amount that stood prior to 01 May, is not transferred out, it is also covered. Any interest earned after that date is also covered.

Aside from Rabo, I still think spreading deposits over all major banks minimizes any worse case OBR event losses.

Didn't Labour during the election campaign propose to introduce a Deposit Guarantee scheme. I think the Greens wanted a $30k limit on the guarantee. Haven't heard anything on this lately, maybe get some primary school students to write a letter to the PM, that seems to work.

Hi R-P,

If there is a major run on funds, who knows what could happen - but it's not impossible that all the trading banks could fail. If the Reserve Bank won't bail them out, then you could wind up taking a haircut (crew cut?) and lose a sizeable chunk of your capital - plus all the accumulated interest.

The point is that if one bank fails, people will rush to take their money out of other banks, for fear that they will fail too! So all the banks go under.

That's where property has an advantage...... it might drop in value if there's a crisis but it will gain in value in the future. With a bank failure, however, you'll never see your money again.

If I was as risk-averse as you, I'd put my money in government guaranteed securities. (The Reserve Bank can never go bust, because it has the power to print money.)

TTP

TTP, it's a dead giveaway you're not a saver ;-) Anyway, even if your extreme version of financial apocalypse were to eventuate, property would be out to the count -60% at least. Maybe then by planting some fruit trees, you could commence bartering because, chances are, jobs would be scarce.....

It's more dignifying if you reduce debt than boil with envy over financial freedoms of others.

Enjoy your weekend.

Hi R-P,

You use the word "apocalypse" - not me.

In any case, in such a situation, there's no way of telling just how the markets will react. Your figure of -60% is completely arbitrary - any market could be more or less than that, depending on how the cookie crumbles.

For me, managed funds (including KiwiSaver) are a preferred way of saving. Over time, these prove to be much more lucrative (and interesting) than term deposits.

TTP

I was pleased recently to negotiate a 5% floating rate but this is still more than a 5-year fix. Will the banks ever compete with competitive floating rates? I would certainly be more loyal to bank that was trying to get me a good outcome.

Floating and loyal are seen as mutually exclusive to the banks. You are only "loyal" if you are bonded through a fixed mortgage.

The lower fixed term rates are the carrot and the high floating rate is the stick.

Unfortunately true. In the UK they have discounted floating rates with tie-ins. I would sign up for a 1.5% off floating deal for a couple of years. It's the flexibility to use irregular income to overpay that I value.

Some banks will allow you to overpay up to 20% without penalty while on fixed term.

Sounds like Westpac is sacrificing the money from its depositors to artificially bring down the long term rate and entice more people into the property market. Soon offshore forces will be pushing up our interest rates and the low OCR won't be enough to battle the upward trend. Gotta keep people lending aye Westpac.

So actually not offering anything to mortgage customers at all. The specuvestors won't fix at five years because the margins are already too tight and throw in a bit of 'negative gearing removal' - which is coming. And removal of interest only mortgages, which won't be long sfter! And we have a very different landscape.

The push here from Westpac is to try and sucker a few fools with cash into propping up the housing Ponzi. Whilst protecting their margins with lower rates to the very very cautious. I'm not sure if it'll work though, particularly now that everyone knows the housing market is retreating! I don't see many people who lock their cash up for 4 and 5 years anyway and the 6-12 month rates would be pretty acceptable to most, those rates haven't moved so people can still access their cash when the bargains start to appear.

Well I spent $3.00 buying a F&P Healthcare share in 2009 and watched it drop to $2.00 by early 2012 so bought another one.

Regrettably I sold one for $14.14 in January and today the remaining one is $15.00. Silly boy.
The only thing I left out of the story is a few orders of magnitude
To old to qualify for Kiwisaver

Interesting times. I wonder what I should do. The rent proceeds keep accumulating and are being stored on deposits (about 3.5%)which are earning less than 1% difference from the mortgage interest rates. (about 4.25%). I have the nice dilemma of wondering if I should pay down mortgages or keep the surplus money in the bank? Comments please?

You are paying 4.25% interest to earn a 3.5% return. Ask yourself.

Precisely why I have no savings but a decent credit card limit. Any money come months pay day goes on the mortgage after paying off last months living expenses on the credit card (interest free of course). What happens to me in an OBR event?

Well I had the same dilemma few years back and sorted it out ... works well for my risk profile.

These additional funds should be put to work to earn much more than 4.25% pa hence If you don't want to take more risk and park them in TD or saving account, then better to payoff debt.

There are many Growth fund managers who would get you at least 7% net return and some go as high as 12 % pa depending on how conservative you are.

In general, it depends on your age and your securities or contingency plans you have in place should markets had a sharp drop or turn, but until then most of the good fund managers should be able to secure your gains.

It is worth doing a bit of your own research instead of relying on examples other people used .... however, Russell Investments, Milford Asset management, Fisher Funds, AMP, and Forsyth Barr Investment Management are few places to start.

You can always payback some loans if it makes you feel better, but why pay a loan when you can use the money profitably?
Why pay back a loan that is much difficult to get nowadays?

hope this helps - good luck