Seven of the eleven banks in the home loan business are offering a 3.89% fixed rate contract as both deposit rates and wholesale rates slide inexorably lower

Seven of the eleven banks in the home loan business are offering a 3.89% fixed rate contract as both deposit rates and wholesale rates slide inexorably lower

SBS Bank is joining the main banks offering 3.89% for one year fixed.

There have been few changes to mortgage rates this week, and this is the only one from a bank.

But the background situation is of falling wholesale rates, and swap rate reductions have actually picked up.

Since the beginning of May, one year wholesale swap rates have fallen -19 bps to 1.52%, two year swap rates are down -19 bps to 1.49%, and three year swap rates have fallen -20 bps to 1.50%. These are all historic lows. And as our charts show, the pace of the reductions picked up markedly after the March 27 signal that an OCR rate cut was likely. The actual May cut hasn't changed the pace. Wholesale markets are keying off what they think Adrian Orr thinks.

At the same time in the background, banks have been quietly reducing some key deposit rates, including where the important volumes are in under one year term deposits, and in some key savings accounts.

Both these reductions allow banks to reduce home loan rates while maintaining their net interest margin.

We suspect that even lower rates are coming from some other banks soon - as soon as Monday.

3.89% is no longer an uncommon rate. You can get it for fixed rate contract rems on one, two or three years from multiple institutions. There are five offering it for one year contracts, two offering it for a two year contract, and virtually three for a three year contract. That covers seven of the eleven banks in the New Zealand mortgage market.

But 3.89% from SBS Bank is market-leading for the 18 month fixed term and they are trhe only bank offering this rate for this tenor.

And don't forget that TSB is offering "a cash contribution of up to 0.50% of the total loan amount, up to a maximum of $4,000" until June 15. There are conditions of course, but many borrowers should be able to meet those.

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 May 24, 2019 % % % % % % %
ANZ 4.99 3.89 4.19 3.95 4.05 4.85 4.95
ASB 4.95 3.95 4.19 3.89 4.05 4.35 4.45
4.99 3.89 4.79 3.95 3.89 4.35 4.45
Kiwibank 4.99 4.05   3.99 4.09 4.29 4.39
Westpac 4.99 3.89 4.09 3.95 3.95 4.35 4.45
3.99 3.99 4.09 3.99 4.15 4.39 4.49
China Construction Bank 5.15 5.10   3.65 3.90    
ICBC 4.85 3.99 4.19 3.99 4.49 4.95 4.99
HSBC 4.85 3.99 3.99 3.99 4.39 4.89 4.95
HSBC 4.99 3.89 3.89 3.99 3.99 4.49 4.49
 with price match promise 4.85 3.89 4.09 3.89 3.89 4.35 4.45

In addition to the above table, BNZ has a fixed seven year rate of 5.95%.

Fixed mortgage rates

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Kicking myself for fixing for three years at 3.95%. Actually only a difference of $4.60 a week for me but to most landlords that will smart a little. That's almost enough to buy a 35cl bottle of Teacher's whisky every month!

You could spend it on Baked Beans rather than the whisky, though now thinking about what's going to happen to Auckland central house prices you might need that whisky :)

Zachary, old chap, you astound me.......

I was sure you'd be a single-malt snob.

Enjoy the weekend!


"Kicking myself for fixing for three years at 3.95%. Actually only a difference of $4.60 a week"
A message in that - rates are currently so low any downward movement is likely to a matter of a few points and effectively the cost of a weekly latte.
Low mortgage rates, outlook for low rates to be continuing, flattish property market, winter season contraction; maybe the stars are aligning for FHB?

I b....y told you to go short Zach, I'm really surprised as you're a smart guy. Soon it will be a bottle of whiskey per week. ; )

Presuming you mean the cheap stuff, you imply a drop to 3.43% for 3 years? That would require quite some drop in swap rates and some pretty painful rates for term deposit holders. Big call.

Love my Teacher's whisky, but guess as I locked in 5% for 5 years 4 years ago it's all I deserve.


Yep those mortgage rates are going to keep tumbling along with the saving rates. Well this is the price we all pay for allowing National to do little to nothing about stopping foreign buying / money laundering for 9 years. The banks are dropping their rates to allow FTB's and salary wage earners to borrow more to try to prevent the property market from crashing.

Though I doubt this will help the Paper Millionaires that much in the more expensive parts of central Auckland and North Shore, prices are still going to drop dramatically no matter how low the mortgage rates drop.

"Yep those mortgage rates are going to keep tumbling along with the saving rates."
At 3.89% there isn't too much possibility to tumble much further. Surely?

Oh you would be surprised, I recon we'll easily be in the 2% mortgage bracket by this time next year. It all depends on how much deep doo doo we're in with the current housing market. Also you have to factor in what's happening with the Big Four Banks in Australia since they hold such a big share in NZ. Basically if property prices continue to slide then so do mortgage rates.

P8, Oh yes rates could certainly go lower. Look what’s happening in Denmark as we speak:
Bankers Stunned as Negative Rates Sweep Across Danish Mortgages

Denmark is fairly awash with capital and funds loans through covered bonds. Investors there obviously happy to pay minor cost to hold their capital. It should be noted that there are lots of admin fees added on top, that are not part of that interest rate. They also have a central bank rate of -0.65%, vs NZ 1.50%.

NZ has "no savings", so capital is challenging to attract, as evidenced by globally ridiculously high deposit rates. That dynamic puts a floor on lending interest rates to some extent. Rules around lending fees under CCCFA also make it harder to offset rates with fees, so impact that also.

Hi CJ099

You write above: "........[house] prices are still going to drop dramatically......"

Afraid your old 78rpm record remains stuck in the groove.

Note that professional forecasters (i.e. those, unlike you, who have their public reputations to consider) are now predicting significant short-term increases in house prices - including Auckland.

Even Retired-Poppy (Patron Saint of the DGM) has gone cold on the idea of a crash - making that clear in a recent post here.

CJ099 - suggest you resume listening to Dame Vera Lynn and other war-time favourites, on your gramophone. (Maybe shout yourself a new needle for weekend listening.)



Really TTP!! Still no facts and full of BS as usual. Go on present me with evidence I can present plenty of evidence where is yours? Show me the figures to suggest that the Auckland property market is rising then?

Which professional forecaster has predicted "significant short-term increases in house prices - including Auckland"? Source please.

The REINZ HPI showed Auckland down 4.4%

I genuinely dont recall anyone saying it would be significant increase in the short term?

For many, it's not the price we pay but the price we save, wonderful. : )))

For evidence of just how far governments will go to make sure house prices don't fall, watch this video from Australia:

The newly re-elected government will do whatever it can to keep the property bubble from popping.

Very good article Davo thanks. And yes it doesn't take a genius to work out that if 'wage earners' can't afford to buy in the more expensive areas that prices are going to have to drop and they certainly have been especially in Australia since they are so reliant on overseas money.

Technically the Australian property market is in the process of crashing (It usually takes 2 years from a property crash to become evident when it drops to -20% and lower) look at even their large cities like Sydney which has already dropped -14.5% since the peak of late 2017 when China clamped down capital flight (Money laundering). Perth has dropped -18% and Darwin -28% according to their CoreLogics data.

CoreLogic Australia data link: house prices - Click the display tab to 'Since Peak' from 2017. If you want to see the full evidence of their price falls.

Why property prices increased so dramatically: ABC News - Real Estate: dirty money laundered through Australian housing

Why house prices have been falling since late 2017; Better Dwelling article: China’s PBoC Announces An Army of Over 400,000 To Prevent Money

Yes you're right, Australia will do anything to avoid their false economy property from crashing (Bit too late for Perth and Darwin though).

Hi CJ099,

The major reason why house prices are falling in some parts of Australia is that there's a surplus of houses.

Conversely, in NZ there's a dire shortage of houses.

This explains why NZ has courted strategies such as "KiwiBuild" - albeit they've been fanciful......

Notably, there's been no parallel "KangarooBuild" programme in Australia.

CJ099 - respectfully suggest you get yourself up-to-speed with what's actually going on.


TTP Obviously you have not looked at the evidence that I provided. Have you not realized that the reason 'why' Australia now has an over supply of new property is due to the overseas buyers having largely gone. Same reason why our Auckland market is falling in the more expensive areas and why most 'wage earners' can not afford to buy new property in our larger cities both here and in Australia.

Cowpat, that article from pre-crash Ireland is quite incredible, and certainly shows how incorrect the main media narrative can be: “The shortfall of housing supply within the Dublin area is set to continue despite a record level of house construction in 2006, according to the latest AIB housing market report.”

Agent TTP thinks we have a housing shortage ha-ha-ha-ha :) Again, there is a glut of overpriced homes. This is why house prices are falling. Its ever harder to secure buyers. (particularly $750k and above) It is what it is. Market forces will reign supreme in the end. Naive first home buyers won't save this market.

Agents certainly need to pedal a lot harder these days. I can sense the fear in the agents comments from a standpoint of weakness.

but muh overseas funding pressure... :-)

Rates returning to historical averages soon is as likely as the government building 100'000 affordable houses

You may be right. Although apparently a reliable indicator of long term trend change is the point when there is absolute certainty it will continue for the foreseeable future.

Go figure? Who would have thought my term deposits would perform way better than the price of my Auckland house? Oh that's right, I did....

Ohhh poor you


Yeah, from a specuvestors perspective, did you know that in a falling house market, debt is toxic no matter how low rates go? No wonder they're still falling.

Life is wonderful : )))

It will only be toxic if your net return is negative. That will depend on each specuvestor's circumstances.

For example, Auckland house bought in 2009 for $300k renting at $650 a week now, costs of $100/wk (e.g. rates and insurance) result in return before interest of $28,600. Return on investment is 9.5% before interest. Interest on $300k (have being paying interest only from day 1) will determine rate of return e.g. 4.3% current fixed rate I am on = 5.2% return, if can fix in January (when mortgage floats) at 3.5% then return increases to 6%.

Sure house may have been worth $900k in 2017 and now worth $860k but I do not care. Lower rates are not toxic to me just because prices are falling.