Taking advantage of low wholesale rates, HSBC launches a very low two year home loan rate, withdraws other 'specials' but still has market-leading rate card

Taking advantage of low wholesale rates, HSBC launches a very low two year home loan rate, withdraws other 'specials' but still has market-leading rate card

HSBC is parleying its wholesale funding advantage into very low mortgage rate pricing.

It has launched a two year Premier special of 3.69%, the lowest-ever fixed home loan rate from any bank.

At the same time it has withdrawn all other Premier special rates, effectively raising them even though the new standard Premier rates are mostly market-leading.

The new 3.69% two year rate is -50 bps lower than Kiwibank's 4.19% rate, the next lowest for that term.

This is also the lowest rate that HSBC has ever offered in the New Zealand market, trumping its previous lowest rate of 3.79% for a 2-year term in August 2016, which at the time was the lowest fixed home loan rate offered in the New Zealand market for over 50 years.

All of HSBC's carded rates are now sub-5%.

This special 2 year home loan rate is being offered for a limited time to new HSBC Premier customers, and existing HSBC Premier customers who borrow an additional $100,000 or more.

Minimum deposit and equity criteria also apply. An individual can qualify to become an HSBC Premier customer either via a minimum combined home loan of $500,000, or $100,000 in savings and investments with HSBC New Zealand.

Two year wholesale rates have dipped -10 bps from the start of 2019 and this fall has helped HSBC especially. Most other banks are primarily funded by customer deposits.

See all banks' carded, or advertised, home loan interest rates here.

Here is the full snapshot of the advertised 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 March 5, 2019 % % % % % % %
               
ANZ 4.99 4.05 4.19 4.29 4.49 5.55 5.69
ASB 4.95 4.05 4.19 4.29 4.49 4.95 5.09
4.99 4.05 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 3.99 4.09 4.29 4.59 5.29 5.49
               
4.05 4.05 4.29 4.29 4.49 4.89 4.99
HSBC 4.85 3.99 3.99 3.69 4.39 4.89 4.95
HSBC 4.99 4.05 4.49 4.29 4.49 4.99 5.09
4.85 3.99 4.19 4.25 4.49 4.95 4.99

In addition to the above table, BNZ has a fixed seven year rate of 5.95%. TSB no longer has a 10 year offer.

Fixed mortgage rates

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David, you have the 3.69% rate in the 18 month column, and 3.99% in the 2 year.

I'm about to refix, any feedback from others on how far under carded rates the big four are going?

All of the big 4 will go sub 4% for 2yrs, 3.90 or below for 1yr with mixed cashback offers (0.4% to 0.75%)

The impending recession has been put on hold?

Record low mortgage rates, record low home sales ( Barfoots ).Barfoots have newly listed 8440 homes in the past 6 months, it has sold just 4178 . Although mortgage rates have never been lower, less than half of listed homes are selling.. A 3.69 mortgage is highly attractive , but Auckland house prices will fall further yet..

Wonder what rate first home buyers are being stress tested at too.

No idea about banks, but my broker advised me to stress test myself at 8%. I did for 10%.

All borrowers, new or existing, are being stress tested to about 7.25%. But only happens when they make a new application.

I come off my 3.9% mortgage in November I think. I expect to get around 3.5% then. Will make life a bit easier

Where is the sweet spot for 1 and 2 year mortgages if banks are wanting to stimulate the market and prevent mortgagee sales - is it 3.5% or 2.99%. With record low Auckland sales volumes in February the banks will be scratching their heads! They have a stockpile of money to lend but nobody wants it!

Gotta keep inflating that asset bubble!

Why no competition in the floating and revolving credit rates? They are creaming it there.

They charge a premium for the borrower being able to jump ship whenever they like. Fixed terms lock you in so you wont jump ship (e.g.Break fees, LINZ costs, lawyers costs, general hassle of changing banks and any cash back you will need to repay).

Yes , though all the fees except the break fees are applicable to changing banks anyway. And if the swap rates are dropping or stable , the break fees are minimal or even negative.

Actually, broadly speaking, that is probably not accurate. When swap rates drop relative to when you fixed, that's usually when there will be higher costs - that's the way wholesale costing works. I guess under the rationale that the bank has to keep paying it's funder (be it wholesale or depositor obligation) at the old/higher rate.

break fees are pretty much the difference between the rate when you fixed and the current rate.

So you can refix at a lower rate, but you have to pay your old bank all the money you are saving.

Hence the only reason i can see to break, is if your are convinced rates are going up, and you want to lock in the current rates rather than wait until your current term expires when you expect rates to be higher than they are now.

So if the banks are reducing their mortgage rates now just to keep the property bubble going what on earth are they going to do to ease the pain if we suffer a GFC2? -4% Interest rates were being talked about yesterday!

Yes, the credit bubble insanity continues. Why are we still at crisis-level interest rates when the economic times are supposedly fairly good? What a situation to be in as the housing bubble bursts. It is bursting in Australia and no doubt the RBA will lower rates even further soon.

Crisis level or just a new normal? I think the latter. Once interest rates come down they can’t really go back up without creating the recession they were trying to prevent.

Withay - I think it is the new normal with inflation so consistantly low there is no reason for Mortgage rates to be above 4%. Many European countries have had sub 4% rates for years. It does not encourage savings on the TD side. What if we have another GFC, I think we will see new polices as we have experienced with the RB controlling house prices with LVR's not interest rates. We are all used to the boom/bust interest rate cycle to contain inflation that doesn't impact like it has in the past. It would seem technology has inflation by the throat ie easy consumer access via the internet to get the best price, AirBnB, Uber, Alibaba,peer to peer lending etc etc etc

Shoreman, since NZ banks source 80% of the funding by way of domestic deposits, there are many out there that would disagree with your anti TD views ;-)

Again, despite your regular assertions to the contrary, NZ banks will not simply steal clients deposits to window dress their dodgy lending decisions. Imagine if word of that got out! There would be bank runs everywhere and property prices would really crash! As you know, there's talk of deposit insurance and banks substantially increasing their capital requirements. This means less to lend on property and even more security for depositors ;-)

RP - The Market will set both deposit and mortgage rates influenced at times of course by the RB whom will drop the OCR as stated by them many times to cover the extra margin that will be put on banks by them having to increase capital requirements. Every week banks seem to be dropping both deposit and/or lending rates, it is what it is neither you or I no matter what we think could or should happen can influence this. I also have some cash in TD's for a rainy day ($250k) and the returns keep dropping. I hope a deposit insurance is introduced atleast to the $250k Australia has, the cost of this is very marginal but a cost it is.

Here's my dilemma. Sure NZ has more room to lower rates when shtf, but the rest of the world? Not so much. Even if we lower rates to stimulate but the rest of the world falters, what will win? I would think NZ being a small country would be forced to suffer with the rest of the world. It's frustrating as I'm looking at making a major play financially (for me anyway) and it would be immensely helpful if the market held up for 1 to 2 more years. The NZ market I think will play it's part in that timeframe as we have a pretty capable RBNZ governor in Adrian Orr but my worry is outside of NZ. I welcome all viewpoints on this in response.

I totally agree. In recent decades its been nothing short of a race to the bottom. Given that the World's Central Banks are already bobbing along the bottom, another GFC will see the RBNZ deploy its unconventional toolbox (thin cushion) to slow the descent towards the inevitable mess of inevitable global deleveraging. Eventually, the resulting deflation is going to screw the finances of the unprepared everywhere. In such a scenario, those who lose least will fare best. I think the odds of this happening are still gradually increasing.

“The New Normal” reminds me of the New Economy talk during the dot com bubble. It really is different this time, hundreds of years of bubble and bust history doesn’t matter, and prices are justified by this new paradigm this time, until reality hits.

Because inflation worthy of a rate hike has yet to show face. While the economy isn't in bad shape, it certainly doesn't need any wind taken out of its "sales" at the moment.

Banks are not reducing mortgage rates to keep up house prices per se, they are lowering the rates to attract more business, the house prices going up, down or sideways is simply the outcome

Yvil, yes they are lowering rates to keep attracting first home buyers to the over-inflated market. We'll look back on this time and that behaviour unfavourably I think, but what choice have they got now? They are also still trying to attract FHBs in Australia, even as the market is falling off a cliff. There's an air of desperation about it. If first home buyers stop buying and wait, that's when the market really falls over, but this situation simply can't go on forever. It's just making the unsustainable debt bubble bigger.

Banks are in the business of selling loans just as retailers are in the business of selling their goods. If the goods don't sell, you lower their price...

We survived the GFC by dropping the OCR by 600 basis points. We will just continue to do it ad infinitum, home owners will quit their jobs and switch to interest only mortgages because the pay will be so much better. They will get pay rises by going to the bank and having their mortgage rewritten to an 80% LVR each time house prices go up.

Well if interest rates are negative there will be no incentive to save cash, further pushing asset prices up.

If its not smart to save cash, or it is to your detriment, the logical thing is to take on debt right?

Its just like slavery from the past, except you're swapping the chains for debt.

But with inflation at 2% that debt will be worthless in 50 years. The same as happened in the bible as debt jubilee's which included freeing the slaves... There is hope;)

https://en.wikipedia.org/wiki/Jubilee_(biblical)

Wonderful : )))

2.5% first mortgage rates within 12 months - what are the chances?

I give that a solid 0% chance.

True, banks will not card 2.5% they would much rather offer 2.49%

"The new 3.69% two year rate is -50 bps lower than Kiwibank's 4.19% rate, the next lowest for that term"

0.5% discount is very attractive proposition to change banks

Well its not Kiwibank , is it ? ............. its HSBC and just in case you were not aware HSBC stands for HONG KONG AND SHANGHAI BANKING CORPORATION , and thats your first clue as to whats going on here.

This is that cheap money from China's QE that has washed up on our shores , and has been a major factor in our property bubble over the past 7 years since 2012 .

HSBC is a British company, but does business all over the world. They are generally conservative and risk averse, so have tended to avoid bubbles and came out of the GFC relatively unscathed because of that. However, they deffo do some big budget dirty deals in emerging markets and have been accused of all sorts including funding deforestation, tax evasion, terrorism and all sorts of shady behavior.

Anyway, HSBC is one of the top 10 biggest banks in the world, their funding sources are global but they have a much stricter lending criteria in NZ than any other bank and have a tiny share of the market so it's simply not true to suggest that somehow they are a cause of the bubble.

Chinese money has found it's way into the NZ property market very easily via Chinese and Oz banks.

In addition to facilitating money laundering by drug cartels, evidence was found of HSBC moving money for Saudi banks tied to terrorist groups.

HSBC - Well worth supporting, otherwise your cocaine may disappear.

You're sure about that Boatman, I thought HSBC stood for Housing Surely Beats Cash?

Houses Soon Be Crashing !

Everyone knows its headquartered in the UK and sees itself as British.

Its done for convenience and to give it respectability. ( which it needs )

You need to ask where it gets its funding to understand where its controlled from

Just Like Anglo American Mining PLC which is "based" in London but has 95% of its operations in South or Southern and Central Africa (famously at 44 Main Street Johannesburg) and also operates "worldwide" but effectively controls South Africa's Gold ( Anglo gold ) , Diamond ( de Beers ), platinum,(Anglo plats) coal (AMCOAL )and iron ore mining . (Kumba ) .

Anglo runs the Botswana economy, and effectively props up various Governments in Africa with its resource and extractive businesses ( such as Namibia and to a lesser extent the DRC and previuosly Zambia )

Anglo even controls the biggest coal port in the Southern Hemisphere at Richards Bay .

HSBC 's London listing is a flag of convenience for big Asian / Hong Kong / Singapore money

Clueless as usual Boatman.
"HSBC 's London listing is a flag of convenience for big Asian / Hong Kong / Singapore money"

HSBC has 1/3 of it's operations in Europe, 1/3rd in the Americas (well until recently), and 1/3rd in asia.

It has 40,000 employees in the UK. The London listing is hardly just a 'flag of convenience', though surely it is convenient for investors to be listed on one of the most liquid exchanges in the world, and convenient given the size of their operations in the UK.

I imagine most asian investors would trade on it's Hong Kong listing though. With secondary listings spread around the world and slogans such as 'the worlds local bank', and a substantial UK operation, to claim the UK listing is a fake attempt to claim respectability is just laughable.

"This is that cheap money from China's QE that has washed up on our shores and has been a major factor in our property bubble"

I did find a few Yuan on Takapuna beach the other day but I didn't think it was the cause for our high house prices, thanks for enlightening me Boatman

It's obvious to most that banks are lowering borrowing rates to attract new business. What may not be as obvious is that its in their interest to keep this bubble from deflating. Banks are selling naive FHB's the dream of homeownership with guaranteed capital gains today while encouraging them to raid their retirement funds. This protects their security. You only have to look at whats happening in Australia when new lending drops of a cliff. The coming RBNZ increased capital requirements on banks is going to have a dramatic effect here too. It's about protecting depositors when the bubble bursts.

On the flip side, there is only so far deposit rates can reduce whilst we still have inflation. In deflationary scenario, that's something else. I would happily accept a 1% term deposit rate if there is a -1% deflation rate.

I just rolled over a one year TD. $10,000 became $10.231, after tax. As a Boomer, I'm openly wondering whether the published inflation rate reflects where I spend my money. It sure as heck doesn't seem to be keeping up with construction costs based on the quotes I've had.

Ex Expat, why waste it on construction at the height of a bubble when like myself you already have a sound roof over your head? You can't eat wood. Where survival really matters, food price index changes as follows;

Jan-18 1.2
Feb-18 -0.5
Mar-18 1
Apr-18 0.1
May-18 0
Jun-18 0.5
Jul-18 0.7
Aug-18 -0.5
Sep-18 -0.1
Oct-18 -0.6
Nov-18 -0.6
Dec-18 -0.2
Jan-19 1

Our food bill is well under control.

My focus on construction is that it takes a while for a project to start so plan at the height and undertake the work in the dip. We are enhancing the parts we use a lot and reconfiguring the less used parts for sporadic rental in retirement. Just have to see where the CGT and Tax laws land as we're not interested in paying tax on it. It appears that we can board two people for $265 each per week and not have to declare it. That's more Gross than we would receive for Super. Of course there are costs associated with boarders.

Good plan :) Construction cost should fall considerably as more construction firms hit the wall. Especially if it turns into a full blown bust.

ex expat, you should invest that $10,000 in another house in Kohi. In few years time it will return you $20,000+ instead of measly $231, hardly enough to fill your BMW.

@retired poppy , your assertion is only part of the story , the reality is that there are asset bubbles everywhere caused by what is essentially.............. money printing.

I have been saying for a few years that we are in economic territory that Central Bankers will never admit to , through QE and money printing in cycle of weak demand, they have led us into a minefield called DEFLATION .

And , they dont know how the hell to get us out of the minefield , especially if they refuse to recognize the minefield .

So they just pretend that they are in control of the situation .

Well if you ever doubted that New Zealand was awash with hot money chasing any yield, then this should put those doubts to rest.

Note that the HSBC "offer" has certain qualifying criteria , including a minimum mortgage of $500k.

One would be wise to read the small print and get clarity on capital repayments , terms , etc .................in other words, test the water before doing any wharf jumping

And test their ancient internet banking before you jump. Ask about a mobile app and online eftpos launch date too.

Not that that matters because you can continue to bank elsewhere for daily transactions.

so you've never had them pull you up on the contractual requirement to move your day to day banking to your mortgage provider?

I always go for revolving credit anyway which doesn't work if you move your 'float' out to another bank for daily transactions.

Is it really a "contractual requirement" or merely a request?

I had the bank who gave us a mortgage request day to day banking/salary into their account, it was actually a condition of our pre approval. Once we were all signed up and the first couple of pays went In just set up a payline split with my employer.

Geez, Retired Poppy, you are one boring angry jealous old fellah!
Do nott worry about what Banks are doing with interest rates, and what house prices are doing!
You can’t change anything and being bitter and twisted about missing out on the housing boom is going to age you!!

Ha-ha-ha :) THE MAN 2, perhaps since you need the help of many Cantabrians to pay off your debts, its you that has the most worries here.

I will beg to differ on yet another one of your missguided opinions ;-) I think it's time you stopped trying to eat wood. It's playing havoc on your temperament.

You know that eventually this madness of de-basing the value of money by printing more or "easing " is going to have to end one day .

When that happens the losses on forced asset sales is going to lead to a bloodbath.

Promises promises.

You're one fun guy Boatman

3.69% you say, Phah! That's nothing, trust me these banks can afford to limbo and lot lower.
It's either lower mortgage rates or NZ will continue on with its slow moving car crash of a property market.

I still think that NZ's mortgage rates are a rip off (Yes I know they were historically a lot higher), you only need to look at bank mortgage rates around the rest of the world to see that!

Yes I know your going to go on about swap rates and all that between different countries but it's only been very recently that the Ozzy banks have allow little old NZ to be at the same mortgage levels with their rates here.

Here's HSBC's rate table for the UK. Check out the 2 year fixed at 1.64% for those with 80% maximum loan to value. Even if you have only a 5% deposit you still get 2.99%
https://www.hsbc.co.uk/mortgages/our-rates/

It's possibly (and some would say likely) not a good thing that our banks (and the Anglosphere) are offering cheap credit to rival that of Japanese banks 20 years after their bubble burst. I can definitely "sense" some negative spinoffs, particularly when h'hold debt to GDP in NZ is even greater than it was that in Japan during their twin property and stock market bubbles.

Yep sure, savings rates will also fall off a cliff to compensate but the flip side is since NZ was stuck in a false economy created by National party for ten years where they allowed foreign buyers and money launders free access to our housing market, rocketing up property prices.

We're now left with the dilemma of how much 'Negative Equity' will the banks allow? This is bad news for banks since if a property falls lower than its mortgaged value, the bank can't really lend at the previous higher value, that's when the the owner is likely to be forced in to selling or face possible repossession.

To allow local salary based buyers to purchase at inflated prices they have to borrow more and therefore need lower rates to borrow more.

Though even with the lower mortgage rates, those paper millionaires in central Auckland are still going to see property prices fall significantly.

I'm waiting to see how the other banks respond.

Oh, "special". Just like those special emergency interest rates from 2008. Seems like the system is broken. See you at the bottom.

banks are getting desperate

This is the “New age recession” for those who ain’t in the position to access those cheap credit to leverage...

Thanks to interest.co.nz and smartphones for fast information.

It amuses me that some people seem to think we should be paying much higher interest rates. High interest rates is the worst usury! The lower the better. Banks should probably insist on people paying off loans in a low interest environment though.

Works both ways. If interest rates were higher, house prices would likely be lower. Furthermore, people with any actual savings would be able to accumulate more for their fiscal prudence.

Higher interest rates area response to inflation so the thought that prices would be lower is a poor one IMHO.

So accumulate more for no extra effort? maybe not......

Higher interest rates area response to inflation so the thought that prices would be lower is a poor one IMHO.

Nonsense. H'holds work off relatively fixed budgets. Higher debt servicing costs means less money to pay off debt and less consumer spending. And less money spent into the consumer economy means less economic and income growth.

As you perhaps allude - lower interest rates would work just fine if we could just shake off the speculative/bubble mentality.

Well, sounds like the government should just hand out money to people because that's even better than interest! The less cost to people the better! Far be it to suggest money should chase a return and the amount of it should be any relation to reality.