Falling wholesale rates and the start of the Spring real estate selling season sees a major home loan lender cut a longer term fixed rate aggressively

ASB has made one of the year's largest home loan rate reductions, cutting its three year fixed rate by -40 basis points.

The new rate is 4.39% as a 'special'. (It also cut its standard rate by the same amount, with that new rate as 4.79%.)

The result is the market leading position for that term - and even beating the equivalent HSBC Premier rate of 4.69%.

All its rivals have a best-rate for three years of 4.85%, so ASB now has a 46 bps advantage.

Perhaps as importantly, this new competitive three year rate is also competitive with most two year fixed rates. In fact, ASB itself is still offering 4.49% for two years as its 'special'.

Not only is the Spring real estate selling season just getting underway, but wholesale swap rates have been trending lower at the same time which opens up the opportunity for moves like this. Today, the two year swap rate is just 2.06%. At the end of June, this rate was 2.35% so that makes the parallel wholesale rate drop was -29 bps.

There are other sharp rates, including a range of offers at 4.19% from a few banks for fixed terms of one and two years. And there is still HSBC Premier's 3.99% one year and 18 month fixed rate 'specials'.

ASB has also cut its five year fixed rate by -40 bps to 5.09% for its 'special' version. But Westpac has a 4.99% five year 'special' in the market.

And it has cut some term deposit rates as well. See here.

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

Here is the full snapshot of the fixed-term 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 August 31, 2018 % % % % % % %
               
4.99 4.29 5.15 4.49 4.85 5.85 5.99
ASB 4.95 4.29 4.39 4.49 4.39 4.95 5.09
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 4.29 4.29 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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26 Comments

3 year fixed rate 4.39/4.79 is way below the floating rate of high 5 percent with long term certainty. Why is floating rate 4 percent above the 90 day bill rate, I recall it used to be 1.5 percent above 90 day rate. Should the comcom be investigating?

Answer: To get you to Fix if you are on Variable before the whole curve drops even more. 4.39%; and even the recent 3.99%, is going to look as expensive as the Special Rates of 4.89% were 2 years back....

So your are saying hold out for more?

Yep, imagine taking up the 7 year special of 5.89% or the 10 year special of 5.99% 3 years ago. They were great deals at the time but they are starting to look very expensive

Yes, and No! If anyone ever asks for my wisdom I always have the same answer "Do 50% now and leave 50% to chance" That way, no matter what happens you can be pleased with yourself!
(For what it's worth, when or if 3 years gets to 3.75%, I'll fix the lot!)

woe to depositors if that happens!

A nephew of mine in the US got a rate like that some years ago if I recall correctly. Hasn't seemed to have made a lot of difference as he still bought an iPhone on time as well - tried to sell it to my son who moved over there recently, explaining that he'd already hire purchased the latest model before having paid that old one off :-).

The world is a mad place.

which is why there is virtually no such thing as a savings account that pays interest in the US. If you're lucky they wont charge you a dormancy fee.

Houseworks, ASB are hardly com-com fodder! They currently offer domestic depositors 3.45-3.65% for 1-3 year terms for $10K and above. Not unlike the other major banks, I understand ASB source over 70% of their funds this way (happy to stand corrected). How can you justify they are ripping the consumer by charging 4.39%?

Is it because you're currently paying over 5% on your negative geared rental? Sour grapes perhaps? Be patient. Rates are going lower yet and you will get your turn too :)

Do you mean the single residential Hamilton flat that is heavily geared and we are struggling to keep up with the mortgage payments and the rental expenses??? No!! Hahaha

How's your single property with the deferred maintenance that you have to live in because you failed to make any wise property investments?

BTW I agree the banks use funding from depositors, I don't think this has changed since a decade ago when the banks margins were much lower. The aussie banks nz operations are the most profitable segment of their businesses.

Yes we have some floating rate mortgage money to manage our cashflow and lump sum payments. See you at the Home Show rp, what funny costume are you wearing?

....yup, sour grapes.

Well FHBs; housing affordability has just got (albeit only very) slightly better.

Given that the market has been relatively flat over winter indicating that a collapse is unlikely to be imminent, and all the indicators (e.g. auction clearance rates and increasing listings) show that the market is definitely a buyers market with the opportunity to bargain hard; is it time to sharpen the pencils, do some calculations, and be prepared to negotiate hard?
The assurance of a three year period also gives at least some time to start paying down debt as protection against future mortgage rate increases and also alongside a likelihood of increasing wages.
Yes, it will be tough and sacrifices will be needed; but then buying a first house has always needed a commitment and has been tough.
Oh, and if you need to put your purchase off another year, given the flat market, house prices won't be drifting further out of your reach day by day as they have done for much of the past decade.

Yep. Buyers market remains, with FOMO being replaced by JOMO (joy of missing out).

Still legacy high prices from cheap overseas cash, but interest rates in decline protecting existing debt positions and prices. Wage inflation underway via Govt sector lolly scramble and already being felt aggressively in the construction sector with several financial drownings visible, and several more heavily rumored.

Govt driving change for investors in the form of exiting overseas pricing impact, minimum equity requirements, loss fencing, minimum healthy living standards, RTA changes, Kiwibuild focus, and Capital gains tax on the radar.

Key issue really is the crazy levels of debt everywhere you turn. The only real winners are the Banks I guess

Heard of FOBE averageman? Fear of buying early. Warren Buffett reckons to be fearful when others are greedy and viceversa, greedy when others are fearful.

4.39% for 3 years! Wow aggressive! Still a clear indication of where banks think interest rates are heading

ASB looking to lock-in a bigger slice of falling mortgage lending growth?
I'm expecting a quick response from the competition.

After TAX and inflation , our savings are basically worthless

Almost, I'm getting 0.88% after tax and inflation. That's why WFF is so attractive for me in the new tax year.

Ex Expat, have you considered voluntary work? It could help suppress those feelings of being disenfranchised. By doing this you'll make a worthwhile contribution to society. Personally, I volunteer my services at least one day per week and have done so since bidding farewell to paid work.

It has crossed my mind since I'm almost up to date on house maintenance. What do you suggest? My experience with volunteering is varied. If you've ever worked on a club committee you'll know what I mean.

Ex Expat, as you know, charitable organisations are as plentiful as the vacancies; https://volunteeringauckland.org.nz/individuals/opportunities

Ex Expat,

It doesn't really matter-there are so many good causes crying out for volunteers. I chose the Hospice based on personal experience,but whatever your particular skills,there will be a charity keen to make use of them.

Growth requires the issuance of new debt, if you won't borrow at %4.8 let's try %4.5 or %4.0 or even %3.0. They need to Find the magic number.
https://youtu.be/_RWXrQqENvg

I wonder if this is a sign that the banks are expecting/experiencing a reduction in the rate of lending to households, (we know gross lending turned negative last month).. So now we have lower mortgage rates competing to win as much of the re-mortgage market as possible? That's pretty much what happened in the UK 10 years ago, it's like watching a repeat of an old classic!.

These historically low interest rates are great news for home buyers (and home owners).........

But very bad news indeed for bank depositors, who we ought to have empathy for - especially for those who are elderly/retired. It's no fun for them.

Banks are signalling that interest rates are going to remain low for a good while yet.

TTP

my bank in spain offers mortgage loans at 1% yes you read it right thats one percent. the best term deposit rate is 0.01%. So there is still plenty of down to go