As mortgage lenders pull back from lending to property investors, offers to owner-occupiers are getting sharper as overall mortgage market growth slows

Kiwibank has brought back its 4.19% two year fixed rate offer.

It is a rate they last had from September 24 to October 8, 2018.

It is a rate that matches HSBC's Premier offer for that fixed term.

But in the meantime, SBS Bank has launched its 3.95% two year offer, so the Kiwibank rate is no longer market-leading.

But it is lower than all its main rivals in the four big Australian-owned banks.

However, almost all of them now have a 4.15% rate. ANZ offers that lower rate for one year, while ASB and Westpac offer it for 18 months.

What today's Kiwibank move does do is push the general market "under 4.2%" level out for the whole 24 month period.

And that comes even though wholesale swap rates for these durations aren't moving.

From mid-June to mid-August, New Zealand two year swap rates fell -20 basis points. This gave the room for the Spring real estate selling season reductions. But since mid-August, those same wholesale swap rates have moved very little. With wholesale swap rates not moving much recently, the retail rate tightening of carded rates is more 'competitive' than cost driven.

At the same time, there isn't evidence of banks pushing down term deposit rate offers recently.

But there is evidence that home loan growth is tame this year. RBNZ data shows that new mortgage lending is up +4.6% in September 2018 compared to the same month a year ago, with new P&I lending up +8.4% while "interest-only" lending (incl. revolving credit) down -3.2%. Given that overall existing loan balances are up +5.9% year-on-year, these new-lending levels are soft. The main reason is a -3.2% fall in lending to investors (and interest-only lending to investors fell an eye-catching -8.6%). Lenders who targeted investors have pulled back sharply after being 'encouraged' by RBNZ policy signals. And they now need to shift their focus to owner-occupiers making that segment hotly competitive.

Borrowers should always remember that discounts from carded offer rates will be available in many cases, especially if your financials are sound and your LVR is under 80%. In some cases, even cash-back incentives are still available - if you ask.

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 October 29, 2018 % % % % % % %
               
4.99 4.15 4.85 4.35 4.49 5.55 5.69
ASB 4.95 4.19 4.15 4.29 4.39 4.95 5.09
4.99 4.19 4.79 4.29 4.49 5.19 5.39
Kiwibank 4.99 4.19   4.19 4.49 4.99 5.09
Westpac 4.99 4.19 4.15 4.29 4.49 5.29 4.99
               
4.50 4.19 4.29 4.35 4.49 4.99 5.15
HSBC 4.85 3.85 3.85 4.19 4.69 4.99 5.29
HSBC 4.99 4.19 4.49 3.95 4.49 4.89 4.89
4.85 4.19 4.29 4.29 4.49 4.95 4.99

In addition to the above table, BNZ has a fixed seven year rate of 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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25 Comments

Need some help from the commentators: "Quote: Borrowers should always remember that discounts from carded offer rates will be available in many cases, especially if your financials are sound and your LVR is under 80%."

End of next year I hope to have around 200k deposit for a house. Wanting to purchase for the first time in the 500k bracket which will give me a 40% deposit. How much do I focus on current carded rates and/or what could I get for shopping around on a 40% deposit?

Also, please don’t just tell me to wait for a market correction, I just want to learn about mortgages.

As mja says, you should be able to get 3.99% easily.

In respect to how to get the best rate, you will need to ask around - will take some time 'though. If you haven't already, make appointments with every bank you want to work with, and play them off each other. I prefer to go in as depending on the day, they might be able to get you a very good rate. Some bank's are changing their commission rules, so you might get a better deal now than in a years time.

Some like to use mortgage brokers to find you the best rate, but won't want to spend time on you if you're waiting until end of 2019.

I hope you don't mind, but I have to ask, why are you waiting until end of 2019? Are you eligible for Homestart and what region are you buying in? If you're eligible you could get access to a few different grants, and be in a home sooner. Kiwibank can be very helpful and provide you all these details.

Depending on the region you could be in a better home for $450k now than if you wait another year. i.e. some regions are still seeing double figure capital gains. The cost to build is still going up significantly also.

Thanks Hobo,

I am waiting for life reasons. In Hamilton currently with no eligibility for homestart (earn too much). Current rent is very low, no kids, 2x international holidays per year, wedding on the horizon, and still saving a bucket load.

The increase in mortgage payments over my rent will hinder the above aspects and reduce my household saving rate of a current 50-60k a year. Done the math on an impressive spreadsheet and currently i am better off renting & saving then owning a house (until i have kids and need to upsize).

I am also weary of the external forces that might impact housing in the next few years.

Pedant mode on: you probably mean wary (as in beware), not weary (as in tired.) :) /pedant

Sounds like you have evaluated the options fairly and come to a conclusion that suits your life goal. No-one but you can say whether it the right or wrong decison, so don't let the property spruikers bully you into taking on a stupid level of debt for an overpriced house. As you say, things will change if/when you have a wife and kids.

I can make the large life decisions easy enough but I don't currently know the best way to attain and the tricks to servicing a mortgage.

1) How can I get the best rate (not advertised rate)
2) What side benefits can I get for higher LVR (e.g. cash back, rate lowered)
3) What are the cons to having a mortgage offset account?

All good questions, and there will be many on this site with a lot of good advice (disclaimer: not advice in the official certified/qualified advice perspective...).

1) Simply ask for it. Unfortunately is all depends on the day and who you ask. i.e. you can ask two different people in the same bank/branch, and possibly get two different answers. Most times if you play two banks against each other e.g. ANZ against Westpac, then you might be able to get a pretty good deal e.g. 0.3% off carded rate. Note, some terms margins are already pretty tight, so depends on the term. e.g. you might not get any better than 3.99% at the moment.
2) if you're 80% or less, then you'll get the discounted rate (as long as your risk profile is all good). Some lenders will lend up to 70%. To be honest 'though, you're borrowing $300k, so not much in it for them. Your value is that you may become a customer for life. I personally don't go for cash back, but they may also offer a small sum to put towards conveyancing.
3) comes down to you. Some swear by them i.e. you could have a plan in place (be very disciplined), and pay off your mortgage in ten years or less. If you're not disciplined then the difference in rate i.e. discounted floating ('though some allow fixed rates) plus fees for the account makes it not worth it. Some on this site have a different strategy 'though. For example, they want to maximise their income to maximise their borrowing power, to invest (shares, property...), then use the investment capital gains to pay down personal debt.

Hi trapped millennial. When you do end up buying a house it Might be a good idea to float $50 k separate to your fixed loan as you mentioned you save $50 k to $60 k per year.if you pay off that fifty g in a year and your fixed for two years save up another $50 k and when your two year fixed expires pay the $50k off you've saved .bang 100k off your morgage in two years

I'd definitely just go to a mortgage broker. They don't charge you anything and will be able to negotiate a far better deal than a layperson could. If you find a good one they will go in to bat for you and negotiate hard. Highly recommend threefold - http://www.threefold.co.nz/people.html#jonathan-michell

I have recently been offered 0.7-0.8% of loan amount as cash back, so in your case would be 2 to 2.5K. Should be able to get 3.99% to 4.04 % fixed for 2 years depending who you go through. TSB work off interest rate of 6.2% for calculating servicing, big 4 use I believe 7.5%. I'm unsure what Kiwibank use for servicing calculations.

"Bloodbath: The four-bedroom, two-bathroom house on a 1210-square metre block, which is close to some of the state's most prestigious state and private schools, was passed in on Saturday for $5.6 million, having been sold last November for $7.8 million." (AFR, Melbourne, this morn)

The above example is why mortgage rates are likely to a lot lower. For those trapped with whatever-they-have, a lower cost of holding ( mortgage rate) is the only thing that will keep mass red ink off the banks' balance sheets....

Interest rates might well head lower in NZ.

But the dynamics of housing markets in Australia & NZ are very different.

Picking worst-case scenarios of markets abroad and assuming the same will happen in NZ is fallacious - to say the least.

TTP

https://www.youtube.com/watch?v=OxG03LPcT4I

The dynamics are no different TTP. The pace of credit expansion is now slowing on both sides of the Tasman Sea. This interview is very informative and will help a few to understand the dynamics and what happens and even if you get lost watching it, invest the time as it will help you communicate falling prices to your real estate clients and why they would be foolish to be above the curve of where prices are being re-set.

Rubbish, conditions between the countries are broadly similar.. years of speculation and chinese money, tightening of lending criteria, housing prices unaffordable, supply catching up to demand and possibly overshooting if demand drops.

bw, you are on the wrong website, Interest.co.nz is a New Zealand site (the ".nz" generally gives it away).
This article refers to NZ lending and NZ interest rates

A lot of Australian investors in NZ as well over the last ten years. Respectfully will have more relevance than just a domain address that you suggest. Same thing could easily happen here in the fabled school zones. A lot of space between overseas paid prices and out of zone price plus private school fees (unless you have 7-10 kids). Its no surprise why Private schools roles are chocka, plus no teacher shortage issue either.

With a 40 % deposit , and able to pay off 50 -60 k a year , there's no need to worry about this.

Foreign buyers no longer being able to purchase existing houses is one thing. However it's worth remembering that existing foreign owners can also choose to sell. In fact if circumstances change significantly they may feel as compelled to sell as they were to buy.

Hi DGM,

The next thing you will be telling everyone is that Australia has an acute (and chronic) shortage of housing - so the Australian Government is about to implement its KangarooBuild policy.........

TTP

Agent TTP, like Australia, NZ has an oversupply of expensive houses. The Australian housing market is becoming more affordable by the day, NZ is sure to follow. Apart from me stating the obvious, I see you haven't stepped up to the plate by presenting some fact based arguments that mitigates the coming debt crisis so to support your housing price "upswing" in 2021; https://www.interest.co.nz/opinion/96590/john-mauldin-says-recent-events...

Hardly surprising.

Hi Retired-Poppy “Crash-Crusader”,

When you say something is sure to happen, we know the opposite will occur.

In that way, you do us a favour.

TTP

Agent TTP, yet another unthought reply. There's still time to put your best foot forward and redeem yourself from all those misleading comments aimed at FHB's. Perhaps it's a big ask to comprehend the bigger picture after all.

Hopefully you'll get a better grip after it all unfolds. There are none so blind as those who will not see.

again wow, carded 2 year rate was 4.59% six months ago. So it's a massive 8.7% decline to 4.19. Stating the obvious but that corresponds to an 8.7% decline in debt servicing costs over 6 months. Just goes to show there's no zero lower bound to interest rates, it's exponential decay. Watch the regions rocket while upper quartile Auckland languishes.

Do you think that will be the case? I see Hawkes bay, Central Hawkes bay etc are still going well and the below one mill. parts of Auckland are remaining steady, so it looks like as you say.

In regards to interest rates, I wondered if it was non bank lenders market share growing and registered banks fighting it out for the home buyers, but when I look at RBNZ sector lending, both are still growing:

https://www.rbnz.govt.nz/statistics/c5

Anyone on this site using non bank lenders for investment property e.g. 80% loans, low doc loans....?