Stable wholesale swap rates and stable bank deposit rates are limiting how far fixed mortgage rates can move down. Westpac pushes a key fighting rate up

Stable wholesale swap rates and stable bank deposit rates are limiting how far fixed mortgage rates can move down. Westpac pushes a key fighting rate up

Westpac has withdrawn its 3.99% one year home loan 'special'.

It is replacing it with a 4.05% rate, mirroring all its main rivals.

That has the consequence that TSB's rate match offer changes as well because that Westpac rate was the lowest of the large Aussie banks. Anyway, the 4.05% rate also matches TSB's own carded 'special' one year fixed rate.

And earlier, SBS Bank reduced its 18 month fixed rate from 4.49% to 4.25%.

None of these recent changes go anywhere near to challenging the new low rates being offered by HSBC Premier. But HSBC Premier rates come with some relatively high qualification requirements. All of HSBC's carded rates are now sub-5%, as are the offers from the Cooperative Bank and TSB.

Since the beginning of February, wholesale swap rates have moved little at the short end of one and two year durations. The one year swap rate is down only -6 bps and a similar fall has occurred for two years. Since the beginning of 2019 the fall is -12 bps. Since the beginning of March there has been no change.

And the main cost driver for banks is their cost of deposit funds. While these have slipped minorly at a handful of banks (about -5 bps) for most, these haven't moved at all. Given that more than 70% of bank funding is based on retail deposits, this doesn't support lower costs and therefore lower mortgage rates.

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 4.05 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 4.25 4.29 4.49 4.99 5.09
4.85 4.05 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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10 Comments

Long term trend: downward interest rates.
German colleague currently has a new mortgage @ 0.75%

You'll be buggered when they finally realise that you can't keep pumping the patient full of adrenaline from now to eternity and call him "cured".

True but it's either that or the patient dies when they crash from adrenaline withdraw. Aka the AKL property market crashes without low rates to support borrowers higher mortgage spend to try to keep up over inflated house prices and stave off negative equity.

Either way NZ and especially Auckland is in for a bumpy ride. You guys really haven't felt the cold touch of negative equity yet have you.

NZ mortgage interest rates are not really low.
5.95% Floating is very high for a developed country post-GFC.
Yes, rates may be ‘low’ from a 1985 to 2006 perspective, but Germany, for example is not exactly trying desperately to keep house prices pumped up - the interest rates are very low however. In fact to buy a Govt bond you have to pay interest not earn it - negative interest rates. That is the world we live in.
NZers tolerate high interest rates - they are an easy-going tolerant people.
They should be lobbying their banks for 3.49% mortgage rates currently.

Yes totally agree. I've found NZ mortgage rates shockingly high. Even now that reality its catching up with over inflated house prices they still seem to be dithering around.

Is there someone out their naive enough to be on a housing floating rate ? Irrelevant

there

This is what happens when the central bank doesn’t listen to the market. Alan Greenspan wouldn’t be happy about this strategy

No , its what happens when the entire worlds economy is dependant on growth.

Correct. Greenspan was just blundering in the dark - no idea what hit him.

And Yellen/Powell/Draghi are equally either bewildered, or they know but dare not enunciate.

Interesting times.