State-owned lender Kiwibank takes benchmark two year fixed home loan rate down to a new low by a major bank, opening up a juicy advantage over its main rivals

There is only one changed home loan rate today (Monday) that hasn't previously been reported and that is from Kiwibank.

And it is relatively significant in the mortgage market.

Kiwibank is now offering 4.19% for two years, a -20 basis points reduction from its previous rate.

It matches what HSBC Premier and SBS Bank are offering, but the Kiwibank shift lower to this level is the first of the major home loan lenders to go there.

It not only validates the SBS Bank and HSBC Premier levels, it open up a -16 bps advantage for Kiwibank over its main rivals at a key point in the Spring selling season.

Given that banks are now applying tighter credit standards, a greater proportion of qualified buyers will have attractive financials. And that can make sharper rates easier for banks to offer.

We report carded rate offers, but the real action is when the rate and cashback negotiations start. Few savvy borrowers with good financials will be paying carded rates although at these levels the discounts won't be as high.

But with 16 bps now on the table for the popular fixed two year term, this may indicate a market shift lower.

There is no indication the funding costs are rising for New Zealand banks (today ANZ reset a $300 mln floating rate note at under 3%), and swap rates are bouncing along near record lows. It is not hard to imagine that the big Aussie-owned banks slipping to this 4.19%/2yr level soon.

Recall, 2018 started with the 2 year fixed rate from the five major banks averaging 4.65%. Two years ago today, customers were fixing at an average of 4.27% and today's 4.19% rate matches what Kiwibank was offering its customers at that time. And that came off a mid-May 2016 three weeks when Kiwibank was offering 3.99% for two years fixed. Back then, two year swap rates were 2.18% which is a full +15 bps higher than they are today.

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 24, 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   4.19 4.85 5.19 5.39
Westpac 4.99 4.29 4.79 4.35 4.49 5.29 4.99
               
4.50 4.19 4.35 4.39 4.49 4.99 5.15
HSBC 4.85 3.99 3.99 4.19 4.69 4.99 5.29
HSBC 4.99 4.19 4.49 4.19 4.49 4.89 4.89
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 recently 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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40 Comments

Great news!

Maybe or maybe not.. The portrayal does look like a kiwbank advert.

Now I don't want to be chastised like my fellow commentator 'Auckland' was recently when he suggested that real estate sponsorship could be influencing the wording of headlines... but the big kiwibank logo would seem to suggest a something of a promotion of their new headline rate in the Spring debt sale?

Yes - it's good news for property buyers and those with mortgages.

The market may prove to be more buoyant over the summer months.

But it's slim pickings for those with bank term deposits. And, frankly, I have empathy for them....... many are retired/senior people who aren't in a position to manage more "active" type investments with higher returns.

TTP

wow that's 30 bp below were it was a few months ago. That's a 6.7% drop (edit oops 4.51->4.21). Exponential decay. I reckon in 10 years they'll be around 2%

At 2% loan rates, NZ would have a dollar at NZ$4 to US$1 and petrol would be about $5.50 a litre. I'm not sure if the Reverse bank would consider that a sensible solution to over-indebted households when it's only 8% of the population that hold 40% of the mortgage debt.

Our savings ratio to household debt is helpful at present but we still fund over 20% of borrowings with offshore funding and lets not forget the gap that losing 6.5% of that funding (Q2 purchases by non-residents in Auckland in June quarter) will have on widening that funding gap.

What if the rest of the world is doing the same? you could have exponentially decaying interest rates without a depreciating NZD. It seems to me that the world has exponentially growing debt and the only way to manage it is exponentially decaying interest rates.

But that's not what's happening. FED may raise twice more this year..... then how much of a lame duck do we look with low returns on Govt. and an over-indebted household sector?

Is that a long term trend though. Or is it just for the next 2 years and then they’ll go back to QE and other shenanigans? Who knows. No doubt NZ rates will drag along behind.

Fed “probably will” raise twice more this year.

And if so, will have a significant effect once more on EM’s and “risk off”.

And thus, the $NZ gets hit again – with subsequent negative flow through.

There is no easy way out.

Thanks Custard

Sometimes the comments section here is like managing the milk at a crèche..... They all want it, as much as they can get, but no-one actually understands where the milk came from.

Nic

"If you can't explain it simply, you don't understand it well enough."

Albert Einstein

Is this simple enough? A letter from Westpac to their 'risky buy-to-let' clients

'Dear John

I'm sorry to put this down in writing rather than talk to you directly but I have met someone else and can no longer continue our relationship. I have shared some wonderful moments with you, it was great picking up the rent cheque every fortnight from your tenants and getting to brag about it in my AGM but sadly I have met someone else and he doesn't want me to play around with you and your friends anymore. It's not that I didn't have fun, I did but my new man 'Mr Liquidity Market' doesn't want me fooling around anymore and has asked me to make a firm commitment to settle down and do as he asks.

I do hope you understand and hopefully there will be someone in the future who will make you happy again.

Best Wishes

Deirdre Westpac'

https://www.youtube.com/watch?v=BbFvwYVfwq0 - I think the chap in this was called John too.

Nic "Deepak Chopra" Johnson, true to form.

Nice story but needs some dragons.

I'm feeling schadenfreude watching that landlord from Adelaide who has all his properties on interest only and no plan to pay the mortgages off ever. It's difficult to feel empathy for a parasite who's been living off others' hard work and displacing young couples from home ownership.

Why only in 10 years? that's a very long time

What happens in business when you haven't made enough sales but still have payroll and costs to meet, you reduce your prices (margins) and have a sale.
Welcome to the Spring Sale of Debt... there's a big hole to fill when the 6.5% purchases in Auckland by non-residents during the June quarter disappears, leaving a big hole in the Ponzi's foundations.

non-residences with overseas income have not been able to get NZ bank lending for some time now...

It's not that Simple Simon. Removing them removes the initial house sale to them and then the subsequent sales and purchases that follow....one injection of foreign money could result in a dozen subsequent sales as the non-resident money filters through the system and into the regions.

Think about it for a few minutes but try and use the big brain and not the little one.

That flow down money was introduced by the foreign buyer, by removing it there will be more demand for borrowing by NZ FHBs who no longer have to compete with cash flush foreigners.

The small brain had arrived again.

So how do you qualify more demand, heavy Gearing?, looser lending practices, longer debt terms or more interest only credit? Just in NZ because the rest of the world woke up to the time bomb a decade ago.. How does it continue? I'm on the edge of my seat to hear how this miracle happens and will convert to the NZPIF if you can show me some magic that isn't daft!

Nah, banks are reducing that availability. Gareth Vaughan suggested between, 15-25% so no that's not whats going to happen 'heavy geareed'.... leverage is tightening dear boy and the banks are having a sale on debt to tempt the last few into the venus fly trap!

Leverage is an unforgiving bedfellow, it's like a venus fly trap, or praying mantis........ has it's fill or its fun, then it eats you, but the fun on the way in was so tempting!

You clearly have no idea what you are talking about, you are the Deepak Chopra of interest.co.nz with your made up woo woo.

Nic, you realise discussion is possible without the ego & patronising insults, right? You've got good points sometimes so just be respectful to others. Disappointing conduct that I'd expect to see of Stuff's comment section rather than here.

It’s not like they’re passing down reduced input costs eh, the OCR hasn’t been dropped and overseas funding hasn’t gotten cheaper.

Maybe the banks need to issue more debt because they’re sitting on a healthy deposit base? They need to send those idle dollars out to battle.

Well last month's business lending contraction suggests that it isn't the productive economy that is buying debt at present. Mr Chaston wrote a good article on this recently

Spot on Nzdan

Does anyone know if they are pumping up the low equity fees/margins? or are they holding steady?

Bummer, wish I had a mortgage. LOL.

dp

Nic Johnson, what line of work are you in or you are inbetween jobs?
You could always be a financial advisor lol

He's unemployed but has been able to amass savings of $1.75 and two snail shells by living with moms. He is focused on causing a property market crash by talking smack on this site in the hope he can pick up a 3 beddie in Devonport with his savings.

He's a bit like a pizza delivery boy or gynecologist... he can sniff what he wants but he just can't taste it.

He's a bit like a pizza delivery boy or gynecologist... he can sniff what he wants but he just can't taste it.

That's the worst analogy ever. Pizza is not unaffordable for a pizza delivery boy. And as a gynaecologist - dealing with all sorts of issues - I severely doubt you'd want to eat what you sniff at work. And if you were earning gynaecologist money there'd be no shortage of tasting options for you outside of work anyway.

Step up your insult game.

Nic Johnson, what line of work are you in or you are inbetween jobs?
You could always be a financial advisor lol

Johnson is just a crusty old pom. Probably involved in the Catholic church and moves countries before he gets found out. I hope he gets deported soon so we don't have to put up with his comments anymore.

Wow, you really have no moral decency at all do you.

I shall have to change my name to 'Father Nic Johnson, shepherd of the unbrainwashed'

Nic, are you trying to say that you are misunderstood?
Most on interest.co can understand that you are jealous towards successful property owners and that you have missed the boat as they say!

Super happy about this. I managed to justttt secure the 4.19% two year rate for my first home end of 2016, and I'm going to break my 2 year term and refix onto this now! I only have 2 months left, and so it costs me around $75 to break the term. Totally worth doing in my books, because the 4.19% for one year was not as appealing if the rate goes up for next year. Also this time of year seems to be when these great rates come around, so scheduling my terms to end this time should hopefully be an advantage.