Kiwibank is the next one to chop a key home loan rate, reducing its one year fixed rate to 4.05% as the main banks follow the challenger banks lower

Hard on the heals of TSB's fixed home loan rate reductions, Kiwibank has jumped in today with one of its own.

In fact, it is a notable one.

Kiwibank has launched a 'special' of 4.05% for one year fixed. As a 'special' it requires a minimum of 20% equity.

This is a -14 bps reduction from their previous 'special' for one year.

It is also far lower than any offer by a main bank, and it is the third lowest rate for any term by any bank. HSBC Premier still has its 3.85% rate in the market for 12 and 18 months, and SBS Bank still has its 3.95% two year rate 'special'.

Kiwibank did not change any other rate at this time.

Update: TSB have advised they erred in advising their rates late last week. The corrected rates are below.

Later update: TSB have trimmed their one year rate yet again, matching Kiwibank.

Where are the wholesale benchmarks heading? Over the last week, wholesale swap rates have moved up about +5 bps, although over the past month the rise has been less than that and not material. International benchmark rates did rise noticeably over the weekend.

We reviewed the margin-to-swap recently here for all mortgage lenders. That review made the point that many lenders are often motivated to offer discounts below carded rates depending on the borrowers financials and the size of the lending. They may also offer cash-back incentives.

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 comprehensive 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 have been 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 November 5, 2018 % % % % % % %
               
ANZ 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 4.15 4.79 4.29 4.49 5.19 5.39
Kiwibank 4.99 4.05   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 4.05 4.19 4.19 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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32 Comments

That's a notable new low amongst main banks, great news for borrowers!

Morphine for the overleveraged many of whom don't understand that rates will be on the up by the middle of next year. Ease the pain for bit so they don't notice the 'equity' bleed.

Sorry Yvil but the credit stacking economy is struggling to keep going we need you and your chums to go and leverage yourselves up a bit more!

up
10

Caution! Caution!
These "Teaser Loans" will reset at higher rates within a year or two, and could become very expensive for borrowers.
This is exactly what happened just before the GFC, where Teaser Loans enticed borrowers to over commit and then default when payments went back to normal.
Any one who takes out loans at these special rates would be well advised to calculate their outgoings two or three years ahead if interest rates were one or two percent higher.

BD, there are a couple of wrong statements in your post (as shown by the multiple thumbs up)

"This is exactly what happened just before the GFC, where Teaser Loans enticed borrowers to over commit and then default when payments went back to normal"
This is completely untrue, interest rates dropped significantly after the GFC

"Any one who takes out loans at these special rates would be well advised to calculate their outgoings two or three years ahead if interest rates were one or two percent higher"

Banks will not lend unless the borrower can service loans 2% higher than current rates, so your "advice" is pointless

" there are a couple of wrong statements in your post (as shown by the multiple thumbs up)"
I find that hilarious but also true.

Not really. Take this lower offer , and pay as much as possible off in the first year. I think you'll find they will be alot better off in a years time , and the interest they will save will cancel any potential higher rate in the future out .

The new norm, the new economy. This is only the beginning for the next five years. Boom for ones who knows how to work with these new rates, ressesion for others...

Interest rates are going to be around these levels for a very long time.
The U.S. can not afford to have their punters paying high rates as it will be turmoil for their citizens as we have seen before.
You can predict anything you like, and economists do, but as we all know they are wrong most of the time and that is why they are still working!!

You are basically wrong about the US. Rates have been rising there since October 2017 when they were 3.95% for a "30 year fixed rate mortgage". As at the end of October they were up to 5.13%. That is a considerable shift higher, and there will be more to come.

(If you follow the link you will need to school yourself up on the uniquely American system of 'points' which will add to the effective loan rates. So you can't just take the interest rate data - there is more too it than that. Their 'points' system isn't used anywhere else that I know of but it is ubiquitous there. And there's more ! They also have a unique system of using a 360 day year for interest calculations. That adds another +1.4% to their interest payments, so a 5.13% rate stated in the US is like a 5.20% rate here where we use a proper 365 day year.)

Bottom line: US rates have been moving higher for over a year now, they are higher than in New Zealand, and they have some considerable upside to go.

Further, New Zeraland wholesale rates aren't going to be able to ignore the track of rates in the world's largest economy for too long. They might for a new more months yet, but we will shift in their direction at some point.

Hi David

I have a little question for you.

I have previously predicted that by end of Q3 next year the RBNZ will have to raise the official cash rate. Do you think that the banks will be raising their interest rates before then?

Best
Nic

I try never to predict future rate changes and levels (although I have been known to weaken). There are just too many variables, and besides, it's the future so its unknowable. But as of now, I do think - all things being equal - the pressures on New Zealand from outside will tend to put rising pressure on us.

"Probably" is as far as I will go. (But just know that most of my previous predictions weren't very accurate. Random luck when they were.)

I admire your modesty and appreciate you getting involved in the comments section. We should have a bit more of it from Gareth, Jenee, David, Roger, Greg etc.

@David Chaston That ignores US public deficits/tax cuts driving inflation over there while in NZ a lot of our recent inflation is just currency adjustment. I dont think id term US rates 'high' at this point, higher yes, but not 'high'.

So how will America sell its debt?

Without any trouble.

Interest rates destined to remain low for a good while yet.

Good news for property owners/buyers.

But I do feel for those who rely on term deposits to supplement their incomes...... (It doesn't seem fair to me.)

TTP

You're right, it isn't fair. Maybe the fools should have invested in housing.

Good news for property owners/buyers.

Don't forget those in line for ineritances as well.

But I do feel for those who rely on term deposits to supplement their incomes...... (It doesn't seem fair to me.)

How abour REITs?

Totally agree with you David. With the ammount of bonds the US Treasury needs to sell there will be huge pressure on yields and the US Ten year effectively sets the rate for the world. Nobody in their right mind will lend money to an Auckland property owner at a lower rate than the US Treasury.

Interest Rates Will Rise - (for those that need a little bit of help understanding this)

https://www.youtube.com/watch?v=slNHsJ3LZtA

I don't need to watch it to know you are wrong. The gap between NZ and US yields can, and likely will, widen further. That probably doesn't suit your narrative though.

We have been getting told by so-called experts for more than 5 years that rates were going to go up!
What have they done?
Dropped, so think we need better experts!,,

We have been getting told by so-called experts for more than 5 years that rates were going to go up!

Likewise, we've been told for more than 5 years that house prices were going to go down!

TTP

8 years 2 months ago someone created an account on this website claiming that PropertyPrices will Fall.

Never too late for a prediction to come true..

Like me predicting you will improve your IQ some day

Well it's not going to happen. The IQ bit that is.

Don't underestimate yourself.. it will, but when is anyone's guess

Yeah, I guess my brain-cells have a longer than normal mitotic time-frame. Not to worry.

mitotic - nice word Nzdan. I'd say your IQ is not too bad..

High interest rates are unfair. People getting extra money in return just for having money isn’t all that fair. Low interest rates encourage them to do something with that money. Savings should be for deferred consumption. Investing should be to get a return. I don’t consider term deposits as investments I think of them as saving.

Dave - do you know what might be worse than people getting extra money in return for having money? People getting extra money in return for having no money to start with (i.e. our current banking system). Then paying the CEO of that company a lot of money for fleecing money from people who had no money to start with.

I’m patiently waiting for the floating rate to take a dive... I’ve been ever so patient about it but frustratingly...