Three more banks lower their home loan rates but only to levels in the middle of the pack - and one of them lowers term deposit rates as well

Three more banks have announced fixed home loan interest rate reductions.

But neither has set their new rates at a market-leading level, both playing it safe in the middle of the peloton.

Westpac has cut rates by between -14 basis points and -60 bps, somewhat as a reflection of how far from being competitive they had become.

Westpac is the only one to cut its six month fixed rate in a long time, taking -26 bps off it to 4.99%.

They made no change to their one year 'special' which stays at 4.29% which interestingly is the highest rate of any bank for this term for a 'special'. But they did reduce -30 bps off their standard rate.

They took -36 bps off their eighteen month rate, taking it down to a more reasonable 4.79% but still high compared with its peers.

And they took -14 bps off their two year 'special' with the new rate settling at 4.35%, the same as offered by ANZ.

-36 bps has taken off their three year 'special', taking it down to 4.49% - but not to a market leading level.

Westpac took a hefty -60 bps off their four year standard rate, reducing it to 5.29%, but ASB, Kiwibank, TSB, and HSBC Premier all have lower levels.

However, they weren't the only mover on Friday. BNZ has cut all its Classic home loan rates.

BNZ has reduced its one year Classic rate by -10 bps to 4.19% which matches ANZ and Kiwibank, as well as SBS Bank. But HSBC Premier is still in the market at 3.99% for that term.

For two years fixed, the new BNZ rate is 4.35%, a -14 bps drop to match ANZ and Westpac, but TSB and HSBC Premier have lower rates.

For three years fixed, the new BNZ rate is down by -36 bps to 4.49% and that also just matches Westpac and ANZ. But ASB is lower with the market-leading position.

BNZ has also cut term deposit rates from -5 basis points to -30 bps for terms of 18 months to five years. And they have cut standard rates for four and five years, plus trimming -20 bps off their unique seven year loan, taking it down to 5.95%.

Westpac did not announce term deposit rate cuts today, but their equivalent rates are already low.

Update: ASB also pushed through two reductions on Friday. Their one year 'special' is down by -10 bps to 4.19% and their two year 'special' is down by -14 bps to 4.35%. Again, these changes just match their rivals.

In the past two weeks, wholesale swap rates have not moved much at all and the rate curves have stopped tightening.

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 4.19 4.39 4.35 4.39 4.95 5.09
5.35 4.19 5.05 4.35 4.49 5.59 5.59
Kiwibank 4.99 4.19   4.39 4.85 5.19 5.39
Westpac 4.99 4.29 4.79 4.35 4.49 5.29 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 has been reduced by -20 bps to 5.95%.

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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38 Comments

Why?

Debt; Money, is little different to many other commodities in reality.
If any product isn't 'selling' and you need the cashflow, then drop the price! Have a Sale etc.
Especially if you foresee the new "Sale" price as being higher than what you will have to drop it to in a Clearance Sale!

If you're asking "Why are banks lowering their rates?" The simple answer is to trying to prevent people from falling in to 'negative equity'.

Haven't you noticed Andrew that our main NZ city areas have been falling in value since we're not being flooded with foreign money anymore.
And that's going to dry up even more in the long term.

Here's a little article from the BBC that helps to explain what has been happening:-
https://www.bbc.com/news/business-45493147

BBC Quote:-

The last 10 years have seen strong growth in Asia and China and that's helped this region weather the storm during the global financial crisis.

For better or for worse, it shifted Asia away from a heavy reliance on the West.

But now with Asia's biggest economy - China - slowing down, the big fear is that another crisis could be brewing.

No-one's quite sure where it would start this time - and how badly we could all be affected.

CJ, may I suggest you learn the difference between cashflow (interest rates) and financial position (house values)

Yvil have you not worked out yet that 'Negative Equity' is very bad news for banks since it means that people can't renew their mortgages and therefore continue to pay off their loans.

Ultimately this leads to property repossessions (mortgagees) that massively has a negative effect on a banks cash flow.

There is a handy information video in the BBC link I attached.
https://www.bbc.com/news/av/business-45489064/who-was-to-blame-for-the-f...

You are making it up as you go along. How about cash flow lends where the bank takes no security? Are they unrenewable? I’ve worked in bad debt consulting. It’s all about whether the payment source is considered impaired. The payment source for most loans is the regular P&I payment not the mortgage security.

Another thing you DGM are ignoring is bank behaviour. It’s no longer the first option to realise security. Laws, publicity and the commission have seen to that.

They may decline another loan or an increase in your credit card limit but they are not going to foreclose on you while you are paying the mortgage and have wages coming in.

Not only are they not going to..I'm pretty sure the CCCFA doesn't allow it.

Well said Zach

What are you talking about? Who 'renews' a mortgage. A mortgage is a 20-30 year loan contract. If you mean 're-fix' then current valuation is largely irrelevant to banks, who would be prevented by the CCCFA from a mortgagee sale purely due to value. Sure, it may mean that customers have limited choices when it comes to moving banks, but the scenario you describe is a stretch.

More importantly though, it's unclear on how some (minor) rate changes would make any difference... would the banks be much more inclined to lift interest rates and get a better return so as to provision for losses, if they were genuinely concerned with asset value.

What you're seeing is simple market pricing forces in action. Why does Harvey Norman have a TV sale when Noel Leemings does? Why does K Mart price match? Because that's how market pricing works.

@CJ Rofl, a guy above literally posted the chart that explains why rates are failing but nope, cant be that bank cost of funds are falling, insane theories must be posted!

To keep existing customers and atract new ones. Simple

...and to try to improve the quality of the banks back-book. The new lending criteria will mean that only 'good quality' customer will be able to move banks, and so improve the new host banks' book. The problem is, the bank they are leaving will be left with the 'poor' stuff, and their overall profile will drop.

There's going to be a scramble to keep/attract the 'good stuff' and mitigate the potential damage of the lower quality loans, and that means - lower rates, and regardless of whether that's good for cashflow at the individual level, it's a sign 'things aren't good' in the wider economy.... and are going to get worse.

Sounds great to me : )

BTW, what "new lending criteria" are you referring to?

Simple question, (hopefully) simple answer

Demographics. Same thing happened in Ireland, US, Japan(1990) and others. Post demographic events, you see property busts and or interest rate compressions

Deposit rates should go to zero, I get that I say that quite casually but that’s what historical studies imply

FYI...Just moved to Kiwibank. 2 year @ 4.20 with a $1,000 cash bonus. Loan of about 235k. ANZ couldn't be bother to come to the party to moved.

Thanks and well done

If all he got is $1,000 cash then the loan is either so small that moving banks is frankly a waste of time or he got a bad deal.

The move was all handled by KB. Accounts, automatic payments, payees all moved by them from data they get from ANZ. My input was minimal. $1,000 is still $1,000 and a better rate is still a better rate...

I dont know your details but you can get 1 year 4.09 and 2 year 4.15 along with ~$1,000 of cash per $100,000 of lending. The cash is a big deal. Most of your 1K was likely gobbled up updating the land registry.

You probably have to have bigger loans to get theses sweet deals. Come on, man, don't rain on head_down_bum_up's parade. Looks like a win to me.

Hes better off so good on him, but when taking the time to switch banks next time, make sure they bleed.

Sorry Laminar but I'm with Zach, HDBU is better off so well done on him

"A massive database will share bank customers’ full credit history with each other for the first time from the end of this month..."
If that's the Aussie Banks, Our Banks, then I guess we have that, or will, here? Might moving lenders have another layer of uncertainty added to it now?

Surely the banks already have access to their customers' credit history? Can you please elaborate?

Bank A has its own credit ( what they told them to get a loan etc) history for Customer X. If Customer X goes to Bank B to transfer their business, Bank B relies on what Customer X tells them (or not!) about their past dealing with Bank A.
Now Bank A shares its history with Bank B, Bank C and Bank D etc, and so when Customer X goes into Bank B,C or D, to move their business, Banks B,C and D already know what Customer X should tell them. It's more than just what Baycorp etc passes on.
Comes in at the end of this month in Aussie, apparently. So it makes sense it will here?

I remember hearing from a interest only debt stacker that the best way to fool the banks was to have your mortgages in different banks so any one bank couldn't get a handle on your true level of indebtedness. If this happens, some will appear as they truly are - emperor with no clothes. Would be very surprised if it didn't follow suit here, but time will tell.

A reality shift in borrowing is taking place. Just like a casino brings you free drinks and acts like your friend while you have money to play the tables/slots. Of course they treat you the same once you stop spending ...don't they?

You generally have to declare all your liabilities when applying for a loan. I doubt this is widespread as the bank will come down on you like a ton of brick if they find out.

Insurance companies do this already somewhat, do they not?

A company I worked for some years back, had the credit controllers of all their opposition meet at their office monthly to discuss who was paying and who was not, in their specific industry. Makes sense to me.

I think it's a lot easier to check anyone's credit worthiness in NZ than you realise bw, including yours and mine. Creditsimple.co.nz
If the banks don't do it now it's simply because they can't be bothered

Time to buy that positively geared property with upside.
Forget buying a KiwiBuild box with no upside, you would be far better off buying that investment property and staying renting if you are in Auckland.
The sharemarket will get s hiding st some stage but housing will continue to grow in value capital wise and rentwise.
You also have control of the asset with housing

Certainly positively geared properties look very desirable now. Any drop in the interest rate is money straight in your pocket and NZ's interest rates could fall a lot lower. Falling interest rates will make your investment more secure, even increase in value, which is a double bonus.

It's closer to Warkworth than Matakana. Middle of nowhere. Who'd want to live there? Is he gonna drive to work every day? Horrible lifestyle.

We were looking to refix $300k with BNZ. BNZ offered to march ASB 3 year rate of 4.39 with another .10 off. We were coming off 4.09 so 4.29 was looking good, but now in laws want us to borrow from them at 3.8% on the condition we make payments of $2k per month (P & I). Sounds like a win win to me. Anyone had experience with this?

Fix for 1 year at 4.19 and up the payments a little to $1000 per fortnight. Your loan will be all paid in 15.7 years. That compares with 17.0 years at $2000 per month with the in-laws' 3.8%.

Use https://www.interest.co.nz/calculators/mortgage-calculator

Bottom line: keep your finances separate from your in-laws. It's not worth the hassle, just to save a few bucks, in case anyone's circumstances change.