Another bank trims a key fixed home loan rate. We review where the market is settling to and assess how much lower it could go as banks try to protect their margins

October is ending with yet another rate cut from a major bank.

BNZ is matching ANZ with a 4.15% one year fixed carded rate.

ASB and Westpac also have carded 4.15% rates, although for eighteen months fixed.

And the market looks like it is moving to 4.19% for two year fixed rates even if most are still at 4.29%.

Wholesale swap rates justify a +6 bps premium for two years over one year, so there will be competitive pressure and room to move in the market to discount current two year rate offers.

The next two months are an important time for bank rollovers as there are a disproportionate level of fixed rate loans falling due in this time of the year.

Headline rates are sometimes harder to extract discounts from, but the rate structure at present might not be as 'fixed' as it seems.

Here is one way to look at it:

And here is the same comparison just for the main banks:

The difference between the two tables is about 30 bps for fixed terms to two years.

Getting another bank down to the lowest offerer shouldn't be too difficult. Banks are usually keen to match the main rivals to hold or win business.

Going below carded rate offers is also possible and that will depend on a range of factors you bring with the business available to a bank.

The two big factors are the strength of your financial position, and the size of the loan.

You are in a stronger position when you have an loan-to-value ratio of less than 80% if you are an owner-occupier.

And if you are borrowing more than $750,000 you will almost certainly get a larger discount.

A combination of the two might entice a bank to offer up to -15 bps below carded rates.

You may also find cash-back incentives are available. Figure on 0.7% of the loan value, up to a maximum of about $8,000.

Usually it will be one or the other; discount or cash, but a combination within those limits is worth talking about.

Which is better? Often you are better to take the hard cash (and apply it against your loan balance is recommended) than the discounted rate. But the math is easy to work out. Use our comprenensive mortgage calculator here to do that.

And if you aren't exactly in the market today for one of these newly lower rates, you may wonder what the costs of breaking an existing contract would cost. You can estimate that here.

We are in a falling rate environment, but regular readers will know that internationally, rates, inflation and policy direction seems to be firming, and quite quickly in some major financial markets. In the intermediate term, New Zealand won't be able to avoid those global pressures. And they may hit closer to home if local inflation moves up on the back of higher fuel prices, higher taxes, and lower exchange rates. The lower rate environment may only be here for a relatively short time.

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 31, 2018	%	%	%	%	%	%	%
ANZ	4.99	4.15	4.85	4.35	4.49	5.55	5.69
	4.95	4.19	4.15	4.29	4.39	4.95	5.09
	4.99	4.15	4.79	4.29	4.49	5.19	5.39
	4.99	4.19		4.19	4.49	4.99	5.09
	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
	4.85	3.85	3.85	4.19	4.69	4.99	5.29
	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%.