TSB takes a sharp pencil to home loan rates three years and longer. ANZ reduces most of its rates, but none market leading

TSB has cut three rates substantially.

All these changes are for fixed home loan rates of three years and longer.

The cut for a three year fixed rate is -36 basis points, taking the new rate down to 4.49%. This is very competitive, although ASB has a lower rate for this term.

The cut for a four year fixed rate is -60 bps, taking its new rate down to 4.95% - which is the lowest four year rate in the market, and matching the ASB rate for that term.

The cut for five years is even more, down -70 bps and taking that fixed rate to 4.99%. That is also the market low, one that matches a Westpac 5 year fixed offer.

Hard on TSB's heals, ANZ has also announced cuts.

ANZ has cut -10 bps from its one year fixed rate 'special' taking it down to 4.19%. ANZ is matching both Kiwibank and SBS Bank.

Its two year fixed rate 'special' has been cut by -14 bps to 4.35%.

And its three year 'special' has been sliced by the same amount as by TSB, down -36 bps to 4.49%.

In addition it has cut standard rates as well. Of these, ANZ's 18 month rate is down by -30 bps to 4.85%. -30 bps has also been cut from its four and five year rates to 5.55% and 5.69% respectively. Neither is market leading.

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 September 12, 2018 % % % % % % %
               
4.99 4.19 4.85 4.35 4.49 5.55 5.69
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 4.49 4.95 4.99

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?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

51 Comments

Partial repost because it's relevant here too.

'One foreign buyer injects $3,000,000 cash into the Auckland market. That money then gets spent on the next Auckland house $1,000,000, a purchase in the Hawkes Bay and a flat in Wellington. Plus all the subsequent transactions that the sellers of Hawkes bay, Auckland ($1,000,000) and Wellington property then are able to make. The impact is enormous when you actually think about it.

Have you ever watched dominoes falling in sequence? that's what the foreign buyer facilitated. Without them it's just debt that someone has to want to take on and be able to access.

During the aftermath of the Brexit vote no one knew where the prices should be without the European buyer wanting to live with us in the UK. Now in the UK the transactions are usually linked and its not uncommon for 5 or 6 houses in a chain to contract at once and then all complete later on. Imagine 6 sales where people have lined up purchases on what they have been offered, they know their equity to transfer to a purchase and the mortgages are all agreed and then the buyer at the bottom, they guy who has the most to lose because he is not already a home owner decides he's uncomfortable and reduces his offer on the house at the bottom of the chain of transactions by £500,000. What happens next? Either, everyone agrees to swallow the loss up the chain, which does happen where sellers are able to think clearly - or what often happens when the transaction is already too tight on finance is that the chain of transactions collapses.

That's where we are now, very few people know what anything is really worth without the cash injection to start it all off at the margin and the banks are all lowering mortgage rates to tempt people into filling the abyss left by the foreign buyer

@Nic :

the banks are all lowering mortgage rates to tempt people into filling the abyss left by the foreign buyer

That means these banks doesn't have any credit crunch yet.. no capital inadequacies etc.. they still be able to create money ..
Hearing some credit crunch stories from Australia.. but here banks r still strong

Nick's comment makes no sense. The reason for banning foreign buyers is that they are rich and Kiwis can't compete with them, they bring their own money from overseas to buy houses in NZ, therefore they do not need a mortgage in NZ

"the banks are all lowering mortgage rates to tempt people into filling the abyss left by the foreign buyer"

is absolute nonsense. It misleads people who may believe this

I disagree. Banks have a clearly vested interest as the issuers of a the debt mountain generating the record profits from NZ mortgages. It is clearly not in their interests to see a decline of NZ prices, but to keep NZ taxpayers enslaved to their profits.

The crux is either the cost of everything rises to normalize the stupid prices (from NZ income perspective), or house prices retreat from their current level to normalize against NZ taxed income (note not overseas tax avoided income). If it it the first option anyone with retirement savings or in a retirement village will be decimated. Due to the increasing size of NZ's retirement population i would suggest that this would not be viewed very well by their Champion Winston.

Protecting the average tax payer is actually the Governments job. Its should not be protecting the interests Foreign Speculators (which includes the banks) over local tax payers.

Averageman, Nic & I are talking about foreign buyers. Nowhere in your post above are you mentioning foreign buyers

I don’t understand your point, Nic didn’t say anything about foreign buyers needing a mortgage or home loan. He was just pointing out that taking out a large market share of our most expensive property markets, Auckland and Queenstown, will have flow on effects.

He drew a long bow to suggest that banks are stimulating the market by reducing their own rates. But he is quite right that saying that removing a “small” share of buyers will have a small impact on prices is bogus.

I just don’t think the banks are agile enough to take take a haircut on their interest revenue to mitigate the potential of increased costs due to lower house prices in the future.

Yes Nick did, he said:

"the banks are all lowering mortgage rates to tempt people into filling the abyss left by the foreign buyer"

it's the last sentence of his post

An abys of foreign buyers means there aren’t any. The suggestion is that banks are trying to tempt other customers into the market, not foreign buyers, in order to keep house prices up.I agree that that’s unlikely.

Seasonally they all have a high volume of their books coming off a fixed term that they’re trying to keep sticky/leasurely fight amongst themselves over.

Nonetheless, the points made about the impact of foreign buyers being missing are still valid.

His point is completely incorrect. The lack of an overseas buyer just changes the time it takes to find the extra buyer, the overall impact is nothing like he implies. Using his example the chain of sales doesnt fail, it just takes a few more weeks to settle.

I find these interest rate cuts a little odd.

To use someone else's terminology – it seems to me that world-wide inflation is steadily moving from the periphery and into the core. The continued abundance of apparently cheap funding into financial institutions is puzzling – the willingness of those to expose themselves to such erosion of value and risk over a relatively lengthy period of time appears also rather courageous, if not foolish.

I guess I just don’t buy into the deflation narrative.

I guess you're saying we won't become Japan. We have more willpower.

I don't think we will become Japan - willpower or otherwise.

I can't see Japan either, A massive productive economy with a huge population and massive value added exports to underpin their housing bubble in the 1980's.(which still saw 30 years of no growth) ... I reckon we're more like Ireland in 2007....said in an Irish accent it becomes more palatable.......'We're proper fucked!'

See it sounds nicer in an Irish accent....

Crucial difference there Nic. We have our own currency, Ireland had the Neue Deutschmark so that is why they were fucked. What is more likely is that the NZD loses a lot of value. It is essentially a stealth wage cut. The NZD has gone down from US88c to 65c, a cut of 26%, yet no blood in the streets. Try putting wages down 26% and see what happens. NZ functions differently from Europe, we are an agricultural nation, England is a financial and industrial nation. Ireland is an agricultural colony of Germany, subject to German monetary control. Not at all the same. It really, really matters what currency your debts are in. My expectation is a rerun of the rolling currency crises leading up 1998 and a lower NZD, but apart from that, and the resulting inflation, not too much unemployment.

Agree with you Roger - Nics claims that the only smart commentators on here all agree with him/her. Not so sure..

I kind of agree, but I don't think it matters because no one is going to take those rates anyway. Its just an easy way for TSB to claim the best rates without having to actually do anything,
If we do get inflation in a few years time, its hard to see the RBNZ ramping up interest rates too quickly because so many people would go under. Its possible those 5 year rates may end up being a good deal, but it would be a bit of a gamble, and I think a lot of people have already been burnt with long term fixes.

up
10

NZ housing stock is still rotten, dated, freezing, falling apart and just plain GROSS. If you believe you can generate an attractive rental yield and/or capital gain - take out a loan from a bank and go for it.

As for me, I have enough antipathy at renting from this gross market, let-alone borrowing a small fortune, at interest, to own property well past its use-by-date.

These lower rates could be the banks trying to drive up demand - why else lower rates? I'm with the kid pointing and shouting "the emperor has no clothes". Housing in NZ seems to be worth what banks are willing to finance - makes sense they want strong demand. Good luck and be careful I guess.

I agree with you Zack in regards to NZ housing stock which for the most part are glorified sheds. Though the Ozzy/NZ banks are doing the same thing the UK & US banks did after the 2008 crash, they're basically trying to avoid a property crash by allowing FTB's to get heavily in debt.

When you think about it, it's an odd situation - after 2008 economic crash the tiger economies rushed in to fill the void. China tried to take the lead by ploughing money in to possible overseas business opportunities that was taken advantage of, along with other more dubious business opportunists. And then the global land grab/investment took hold from 2010 to 17 and here we are, left with the hangover. The hangover of course caused by Trump throwing his toys out of his pram by implementing trade tariffs.

As NZ lending interest rates keep falling, what is the risk of locking in your mortgage rate for 3 years?
Banks will need to keep lending to borrowers, otherwise all the securities they have will fall in value.

The banks in the US couldn’t stop the inevitable.

However, very different scenario I know.

Seems like you're oversimplifying it. While falling security value could be a concern .. it would only be an issue if there were sharp default rates and the banks needed to sell said securities via mortgagee sales. Remember it's a different scenario to the US, as NZ mortgages are 'all obligations' and home owners can't just walk away.

3 year fixing would be great for borrowers facing some pressure on wages - there is certainty of payment for a very small cost (the prices are reasonably flat 1-3 years)

Most US mortgages are also full-recourse, http://realestateresearch.frbatlanta.org/rer/2010/02/did-nonrecourse-mor...

The paper, in an accompanying appendix, provides details of the foreclosure process and timeline for all 50 states. The bottom line, they find, is that the claim that all mortgages in the United States are nonrecourse is wrong. The authors show that only eleven states constrain the recourse that lenders hold over delinquent mortgage borrowers. The other 39 states place no limits on the ability of lenders to recover what they are owed by getting deficiency judgments, which are legal claims to any and all of the borrower's assets to cover the deficiency, or the difference between what the lender recovers from foreclosure and what the borrower owes. Of the 11 states that limit—but do not forbid—recourse, California, for example, prohibits deficiency judgments only if the loan is a purchase mortgage and the lender wants to pursue "fast-track," nonjudicial foreclosure. If the loan is a refinance or the lender wants to pursue a judicial foreclosure, California offers no protection from recourse.

and the next paragraph after that points out why full-recourse doesn't really matter anyway

One obvious question is that if lenders can chase down borrowers to recover unpaid debts, why are they losing so much money? The answer is pretty simple. Most borrowers who default on their mortgages probably have no assets to go after. The reason that the borrower defaulted on the mortgage was that they had run out of money.

Thanks for the research share :)

Still, even if that is true, it does seem easier with less hassle and less downstream impact to declare bankruptcy in the US than it does here (which might be why they don't put in the effort to chase)

Housing held as security is not marked to market and banks have actually been at record net interest income. Inter-bank lending costs have been dropping since February so you are seeing rate cuts.

Down, down, down. : )))

Potential 25 Basis Point hike by the US Federal Reserve later this month.

NZ$ shortly to hit US$0.64

Inflationary pressures on imported goods.

Degree of capital flight seeking better returns offshore.

Increasing funding costs.

????

You left out oil at 79dollars and climbing

Majority of funding comes from within NZ & increasing custard, so what happens overseas affects NZ less and less

Yes, I understand the NZ funding angle.

I guess what I’m alluding to is that there may come a time where what happens overseas may start to make a difference.

A widening interest rate differential and the continuing risk of a devaluing NZ$ would have some level of impact at some point I would have thought.

Custard, well said :) Majority of domestic bank deposits are in terms less than a year. The tide could change quickly. Yvil's naive on this.

Shorter term rates are under heavy influence from the OCR so you are likely overstating the risk.

@Custard A lower NZD is almost certainly desired by the Reserve bank.

But how low?

And where and how do you stop it?

From a classical perspective you would lower your currency until your balance of trade was roughly neutral. The Reserve will have a range target, i dont know what that is but they use to say about 65 cents was reasonable so perhaps a range of about 55 cents to 75 cents rather than the 70 cents to 90 cents it ranged across from 2010 to 2015.
The only real means they have to defend the currency from big drops is NZD purchases and/or rate hikes, both of which will be very limited in scope, its likely if the NZD really dives they would have to let it run its course.

"The only real means they have to defend the currency from big drops is NZD purchases and/or rate hikes, both of which will be very limited in scope, its likely if the NZD really dives they would have to let it run its course."

Thanks Laminar - that was basically my point - I just feel a little bit of "be careful what you wish for".

For some reason I've got a historical 65c to 68c in my head - we're there already - and all indications are we're heading further south.

Capital flight is already well underway. It is as much about capital protection as it is about interest rate differentials. In a global crisis the NZD could go a lot lower than we think possible, or not, crises are chaotic.

This is good news for the mythical over-leveraged folk, no?

Not many, perhaps no one, has got themselves "over leveraged" in the last year or two. The ones that were already have seen the mortgage rates drop significantly, probably putting them into positive territory.

Bear in mind that the over leveraged usually have two good incomes coming in which may have got a little better over the last couple of years. And, oh, rents have gone up as well.

Sustained low interest rates are good news for all NZ consumers - except for the minority who get themselves donkey-deep in debt.

As outlined by Greg Ninness in a column last weekend, the indications are that price stability will remain a feature of the housing market heading into 2019 - and the current round of interest rate cuts will reinforce that effect.

TTP

Not good news for those who made the decision to supplement their retirement on term deposits rather than housing equity/rental income.

Hi Nzdan,

You're correct about that.

But, technically, I would label those with term deposits as being "investors" rather than consumers.

TTP

thats the RBNZ definition but i remember as a youngster the ASB piggy bank to learn how to save, not invest
which is still around today, maybe they need to update the slogan,
https://www.asb.co.nz/banking-with-asb/clever-kash.html
maybe the CC or FMA should take them to court for false advertising of a financial product

All depends on how much you have invested and what your outgoing are, its all relative. Also anyone on a TD typically has their money tied up for at least 9 to 12 months. Longer term rates are coming down but the 12 month rate looks pretty stable. Interest rates could easily upswing in the next 12 months, in fact I'm expecting an increase.Plenty of people out there who made the right decisions in life are now effectively "Untouchable" financially so they really don't care.

I'd have thought those 'donkey-deep in debt' would be benefiting even more from sustained low interest rates than the average Joe. Those who don't benefit are those without assets, as low interest rate supports/increases the value of housing and shares. Even if a mortgage gets easier to service, the principal still needs paying off eventually.

Pointy, pointy, pointy - after the last couple of days I would expect you to be a bit more circumspect. But no, bold statements based on what ? You may just end up with more egg on your face.

The Cannibals have started to eat each other, as the flow of Missionaries has stopped?
Someone(s)....is going to starve to death....

Actually doing very well with interest rates at half what they were 10 years ago

The Banks...are the Cannibals, not their customers. The Customers are their fodder, and there are fewer of them by the day. The only 'food' banks will have soon is to poach each other's customers ...if indeed those customers measure up to the new criteria of changing banks with a loan, and can move. If loan growth stops, banks stop or, as we are seeing in Australia, their loan rates suddenly reverse upwards, as margin growth is the last option left to them. The logical conclusion is that 'someones going to starve' ie: there will be fewer banks required as their food - debt- dries up.

PS: Lower mortgage rates are similar to convincing the Missionaries (ie; bank customers) that the simmering water in the cooking pot is actually a nice warm bath that's good for them!

OK, I get you

Great news for the leveraged borrowers that so many commenters on this site are so worried for ; )

5 years fixed at 4.99% has to be attractive to those who think rates are on their way up.

(and they could be right but you have to have the courage to put your money where your mouth is, i.e, lock in the 5 year term to actually benefit financially)

But according to your theory, if interest rates go up, house prices go down.. so wouldn't they be better selling now and taking whatever equity they have and sticking it under the matress while the market falls over?