ANZ, National cut mortgage rates

Property

ANZ and National Bank cut 6 mth, 1 yr, 18 mth and 2 yr mortgage rates by 9 to 30 basis points after weak inflation data

19th Jan 12, 5:32pm by Bernard Hickey

ANZ and its sister bank National Bank have cut their fixed mortgage rates by as much as 30 basis points after surprisingly weak inflation data for the December quarter led to a fall in wholesale interest rates and saw some economists push out their expectations of a Reserve Bank rate hike until late this year.

See Alex Tarrant's article on the surprisingly weak inflation data.

ANZ and National cut their six month mortgage rates by 10 basis points to 5.65%. They cut their 1 year mortgage rates by 9 basis points to 5.70% and their 18 month mortgage rates by 10 basis points to 5.89%. They cut their 2 year mortgage rates by 30 basis points to 5.79%.

However, they left their 3, 4 and 5 year rates unchanged at 6.45%, 6.85% and 7.25% respectively. They also left their floating mortgage rates unchanged at 5.74%.

See all bank mortgage rates here.

Wholesale 'swap' interest rates, which are often the basis for fixed mortgage rates, fell as much as 10 basis points after data was released showing the Consumer Price Index fell 0.3% in the December quarter from the September quarter.

Economists and the Reserve Bank had expected inflation of 0.4% for the quarter.

ANZ Economist Cameron Bagrie said the soft inflation data had removed the prospect of a Reserve Bank rate hike from the agenda. He even asked the question if a cut should now be expected.

"Today’s softer than expected CPI is likely to encourage the RBNZ to remain on the sidelines for longer and will provide them with more scope to cut the OCR should the global outlook deteriorate further," Bagrie said.

"But the hurdle to such an outcome is high in our mind given the stickiness of some medium-term inflation drivers and the likelihood of a reversal in some of the Q4 price falls."

Floating mortgage rates are more closely linked to the Reserve Bank's Official Cash Rate.

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44 Comments

by Chris_J | 19th Jan 12, 6:01pm 1326949262

Lower for longer.

We are on our way to uncharted territory. The economy is not getting better. Insurance money in general will pay off bank debt rather than going into any rebuild.

The earthquake is an exercise in how to downsize an economy.

We were confident that the 5.99 to 6.49% 3 to 5 year fixed rates we obtained in early 2009 would prove more expensive and broke them immediately after the Feb 22 earthquake. That certainly proved to be the case with 2 year rates now well under 6% and insurance payouts looking likely to well exceed our total debts.

by moa man | 19th Jan 12, 11:26pm 1326968780

Here is a tip for you Chris, try paying cash for your buildings. Then you won't have to bellyache on continuosly about mortgage rates. Not out of this world is it? Not a foreign concept at all?

And that goes for all of you mortgage freaks out there. It might mean a few less buildings you can claim to own, but it would mitigate the mass murder of pixels inflicted by moaning borrowers.

by Roger Witherspoon | 21st Jan 12, 6:00pm 1327122035

"mitigate the mass murder of pixels inflicted by moaning borrowers" ? Now where is the fun in that?

by steven | 23rd Jan 12, 7:57am 1327258653

Agree, right now debt is bad...the great thing is of course if you have no debt and things pick up you can go on a buying spree you have collateral....maybe you lose a few % by being late.....if its drops, well you lose capital but the bank doesnt dictate your future....

regards

by Wolly | 19th Jan 12, 6:29pm 1326950978

Why they do that?.....oh here's why...

"Australia unexpectedly lost jobs for a second straight month in December, capping the nation’s worst year for employment in almost two decades and weakening the local currency as traders raised bets on interest-rate cuts"

.http://www.bloomberg.com/news/2012-01-19/australian-employment-unexpectedly-falls-currency-drops-on-rate-cut-bets.html

Remember the fact...we depend on aus and they depend on China...the recession over there is starting to flame up...and for us it means......have a guess!

So after a quick word with Alan the bank opts to flog more cheap credit..freshly imagined into the market...the only way to solve a debt crisis is to have more debt...and the property bubble must be saved....so many bloated salaries and bonuses depend on it.

by Matt in Auck | 20th Jan 12, 2:05pm 1327021522

exactly - the property bubble is the only thing keeping NZ afloat, and the powers that be know it

so ignore all the BS from Bill and co about re-orientating the NZ economy, its onwards and upwards with sheeps and cows and shacks tacked on

by jimmy squirrell | 20th Jan 12, 2:23pm 1327022623

agree - lower rates were about helping akld property speculators, christchurch is the last thing on the govt's mind. I've always maintained over teh last 5 years that govt policy forces us to choose between the lesser of 3 evils:

1) invest in an obscenely overpriced asset, knowing that the govt will do all in its power to keep it overpriced via low rates, tax incentives etc

2) put in the bank and be raped by low rates and FULL marginal tax rates (but at least enjoy a govt gurantee)

3) gamble on the share market which on the face of it is better value than property or cash, but which the govt does not try to save

by Matt in Auck | 20th Jan 12, 3:37pm 1327027031

spot on

but hey we are going to have a very attractive investment option soon once the nats flog off shares in some of our assets

by steven | 23rd Jan 12, 8:00am 1327258844

There is no other game in town......when you have bet heavily in a one trick confidence game of you dare not lose that "[f]ace" if/when the property game goes the fallout will be like Ireland.....and the Govn must be more scared of that than anything...

regards

by MortgageBelt | 19th Jan 12, 9:47pm 1326962873

Westpac still the cheapest on 12month & 6month fixed at 5.59%. Maybe ANZ & National customers have been pointing that out.

by Steptoe | 20th Jan 12, 8:27am 1327001232

Yep my thoughts also, more competition for customers than a 'rub of the heart', then to do it at this piont in time certainly gets them some PR brownie pionts...and banks dont have hearts to rub..Shilock wanted the heart and the blood.

by Frazcam | 20th Jan 12, 1:36pm 1327019760

Yep we switched from ASB to Westpac, because it looked like they were the cheapest over a period of time. Mind you, with most banks they will price match if need be.

by ITYS | 20th Jan 12, 8:02am 1326999720

Yet no movement in the floating rate? Surely a Clayton's Interest Rate move as well over 50% on floating mortgages and if the more information around the OCR staying put for longer as growth remains anaemic this will trend towards 75% rapidly.

Where are all the 'fix for 5 years. Now. Do it!' people now? You know who you are...

by Leadbelly | 20th Jan 12, 6:25pm 1327037146

ITYS, I dont like doing what everyone else is doing. If 75% of us plebs are floating surely the private banks will use an excuse, real or imagined eg. overseas funding costs to jack the rates? After all its their mandate to maximse profit for their shareholders.

Why can't our central bank lend direct to us for 3%? I mean WTF? Wots so essential or unique about private banks that couldnt be achieved by our central bank and just cut the middle men out? Am I just unbelievably naive? Happy to expose my ignorance. I'm not a conspiracy theorist, I just dont get it.

by MortgageBelt | 20th Jan 12, 8:15am 1327000534

If floating is higher than Fixed - would you get charged for breaking the Fixed rate?

by ITYS | 20th Jan 12, 8:27am 1327001252

Should be a refund based on the calculation we used to use at the Bank. No doubt 'admin' fees would be created to negate such a thing happening...

Yet another example of why we continue to be ripped off by the floating rate.

The 5.75% rate still equates to 3.00% above 90 day bank bill rate. Rural lending, once deemed to be 'more expensive than residential securities', now sits at around 2.4% above bill.

Go figure... Because I can't...

by pinkorchid | 20th Jan 12, 9:41am 1327005679

Bernard, under what circumstances would we see offshore borrowing go up sharply pushing up mortgage rates overnight?

I'm thinking that there's already a problem with interbank lending within the EU and this will probably only get worse. If Greece or another junk status country in the EU defaults or a major European bank goes under, won't this push up the cost of borrowing for NZ/Aus banks almost immediately?

Do you think it's worth locking in a good rate now such as the 4-year fixed at 5.99% that Kiwibank (and other banks through brokers) is offering? I know a lot of people think rates will fall because of the global recessionary environment but if banks aren't lending to each other then I would think that would quickly push up the fixed rates on offer. Would this also push up the floating rate?

Thanks.

by Bernard Hickey | 20th Jan 12, 8:04pm 1327043059

PinkOrchid

Reserve Bank figures here http://rbnz.govt.nz/statistics/banksys/g5/data.html show bank net interest margins are up 44 basis points in the last two years, which means the banks have some room to move before they pass on higher overseas funding costs in the form of higher floating rates without an OCR hike.

All hell will break loose if they do choose to protect their too-high profits/dividends by inflating their net interest margins any further. Politically at least. See what happened in Australia last year. Effigies of Ralph Norris were burnt and he personally lost millions in bonuses when his customer satisfaction levels slumped.

My view on interest rates is low (and possibly even lower) for longer

We are in a Japanese style great repression of interest rates (by central banks and governments) aimed at eating the unsustainable debts with negative real interest rates that punish term depositers at the expense of borrowers.

cheers

Bernard

by steven | 23rd Jan 12, 8:04am 1327259055

Which also then forces the depositors out into the shark infested and storm risky seas of speculation.....in effect its a way to prop things up....

regards

by Chris-M | 20th Jan 12, 10:27am 1327008461

I could never understand why housing was excluded from the calculation of inflation, except in terms of the Machivalian motives of politicians.

It has a very real effect on the pockets of those trying to save for a house.

It enables the establishment to effectively not compensate workers for increases in this large proportion of their living costs as it is not included in the CPI.

It removes the corrective response of raising morgages rates and dampening oversease borrowowing as property prices rise. This very much suites the politically favoured property speculating sector of the economy.

Any way, here we go again, house prices rising, interest rates droping. It can only crank up the property bubble machine which we need like a hole in the head.

by Chris-M | 20th Jan 12, 11:42am 1327012965

see below

by Chris_J | 20th Jan 12, 12:52pm 1327017148

mist, that argument doesn't wash and is why the boom/bust cycles have got out of control since "inflation targeting" become the method of choice in monetary policy.

You would of course note that most people don't buy a washing machine, television or car regularly either. Actually I suspect more people than not have an oven, dishwasher, clothes dryer, or washing machine that was manufactured prior to them purchasing their current house!

Swamping, is not an argument either. Include the average mortgage interest payment for someone buying an average home with an average mortgage and you would have something that could be a valid component of CPI.

Of course that means inflation would be dependant on the mortgage rate itself, so all the economists will be baulking but in reality interest rates are part of the weekly household bill and and it is the main component of the most expensive consumer product - the mortgage.

Now it would create feedback loops, so it would make the RBNZ's job more tricky but it would also limit the boom bust cycles, which is exactly what is needed.

by jimmy squirrell | 20th Jan 12, 12:53pm 1327017180

Chris-M

"except in terms of the Machivalian motives of politicians"

theres your answer. Every reason you gave to justify including housing in the CPI is exactly why they dont do it. I recall the Blair govt ditching the RPI (which included houses) as a measure of inflation when they came into govt. It was running at 5% during the housing bubble, the new measure made everything look benign and therefore monetary policy remained loose. It was planned, they knew it was flawed, but hell if it gets you through to the next election .......

by steven | 23rd Jan 12, 8:11am 1327259482

because to set rates you want a base figure.....hence we have core inflation as a metric.....and then CPI.......remeber Wolly whinning about CPI at 5.6%? that was for some months, now its dropping back.......over 1 or 2 years the mean or average rate is far lower.....so it makes no sense to make claims based on the short term peaks....and not set the OCR that way either.....

From what i can see the property market is patchy.....some areas up, some seem way dow. Problem is getting a real picture...for instance as I posted elsewhere a 500k house bought 4 years ago next to us is now rented as the best offer was 360k......that no sale isnt reflected in the numbers......also I now look out over a house thats been empty 9 months......vines ripped out...relations that havnt sold in 2+years.....they want too much.....all of them but are happy to hang on.....for now.......

regards

by Chris-M | 20th Jan 12, 11:31am 1327012293

Try those soothing words on the young couples whose rents do over the long term track ever rising houses prices while they desperately try saving the deposit for their first house. House prices continue to rise and the prospect of owning their own home dissapears over the horizon while the increase in this very real living cost is not recognised in the CPI and any wage rises.

I don't think that you will get much sympathy.

The way you put it, it does dwarf other living costs but for many this is in some ways realistic as it can be over half their annual income. Perhaps the most realistic way to weight it would be to apply a rate of reurn on the house value, say 8% of the house value. I.E. if house prices rose on average $50,000 the rise in living costs for the CPI would equate to $4000

by Matt in Auck | 20th Jan 12, 12:07pm 1327014455

The govt sponsored ponzi continues - so much for National's stated economoic goals!

I was interested to read Tony Alexander's piece this morning. I thought it was quite bizarre. On the one hand he was VERY bearish on the NZ economy and seemed to be talking down its growth prospects, but then he said the following:

New Zealand’s residential real estate market is slowing improving driven by a shortage of listings and lowest construction in 40 years encouraging buyers with foresight to get in before a stronger labour market brings a wave of buyers in.

Whilst I think he's right in terms of the first half of his statement, I find it hard to reconcile his bearish views on the NZ economy with his notion of a strengthening labour market ("bringing a wave of buyers in")

He still comes across as a housing spruiker to me!

by steven | 23rd Jan 12, 8:15am 1327259708

Yep.....these are contradictory statements imho.......

There is no sign of rising wages....no real job shortages....ppl I talk to are either only OK or finding it quieter this year.......damn the picture is so unclear......

regards

by Frazcam | 20th Jan 12, 1:38pm 1327019909

by jimmy squirrell | 20th Jan 12, 2:18pm 1327022280

i agree

by BigDaddy | 22nd Jan 12, 7:43pm 1327214606

Olly Newland was right as usual and has already stated that interest rates would stay low some time ago . Why this is "news" now is a mystery when anyone who read Olly's columns would have well ahead of the game:

Nov 10 2011

“Interest rates are down and ‘down for the count’ … and let me go out on a limb here and say I believe that low interest rates are here to stay for the foreseeable future”

Link:

http://www.ollynewland.co.nz/?s=column

by Nicholas Arrand | 22nd Jan 12, 7:56pm 1327215398

Wasn't Olly Newland calling for hyperinflation, and all the attendant interest rate consequnces, when we more level headed people were already calling low/no inflation or outright deflation, and much lower interest rates?

http://nicholasarrand.wordpress.com/2012/01/22/low-interest-rate-will-be-bad-for-property-prices/

by David George | 22nd Jan 12, 9:19pm 1327220384

Olly's been saying that interest rates will stay low (I agree) but wages, rents and real estate prices will soar. Why anyone would endorse such utter nonsense is beyond me.

by BigDaddy | 22nd Jan 12, 8:01pm 1327215681

Olly never called for hyper inflation. In fact he warns against it.

Olly quite rightly says that low interest rates and the printing of endless amounts of money could create hyper inflation.

If it does come, bad as it is, investors may as well take advantage of it,

Who wouldn't?

by Matt in Auck | 22nd Jan 12, 9:48pm 1327222134

I don't know whats going on in Newland's head.....delusion, senility, desperation????

He's predicting boom times for housing, and rents to double in the next couple of years. Absurd stuff

Most of us can see through it, here's hoping few gullible people will listen to him and get ruined

by BigDaddy | 22nd Jan 12, 10:42pm 1327225327

The only delusional person around here is Matt.

Olly"s predictions are coming true already:

From "www.stuff.co.nz" today:

"Rents in many parts of Auckland and Wellington have increased by more than three times the national average in the last year.

According to the Real Estate Institute of New Zealand, the national median rent charged for three-bedroom homes tenanted last month was $350 a week, compared with $340 in December 2010, an increase of 2.9 per cent.

But in major centres such as Auckland and Wellington, where demand for accommodation is greatest, the median rents in many suburbs increased by 10 per cent or more (see table). In the fashionable Auckland suburbs of Grey Lynn and Westmere, the median rent for a three-bedroom house increased from $580 to $660, a 14 per cent rise.

Properties in central Wellington suburbs also showed increases of about 10 per cent".

Link:

http://www.stuff.co.nz/business/industries/6295358/Rent-hikes-hit-hard-…

Suck it up Matt.

Olly's right on the button.

by David George | 23rd Jan 12, 6:07am 1327252024

You can't just cherry pick a few suburbs, the average national rise was $10 a week. That's less than the increase in outgoings due to rates and insurance costs as well as the 20% rise in GST on maintenance etc. (non recoverable for residential) and the loss of the depreciation allowance.

BTW, insurance premiums are rising sustantially.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10780518

by steven | 23rd Jan 12, 7:51am 1327258301

To start with you shouldnt cherry pick if you want good guidence.....you should establish a base cost/price.......some areas are doing better than taht, then those then are worth looking at....sure....

There are however risks......

Printing "could" cause hyper-inflation.....this is a simplistic analysis and incomplete, so its faulty...badly so. Olly lives in the past and I think cant see a) bigger pictures and b) structural/paradgym shifts....

In the last 3 or 4 years how much has been printed? answer trillions.....where is the rise in core inflation as a result? around the world we are seeing 2% ish.......if anything we see the effects of a liquidity trap and are having dis-inflation.....Consider the debt, that has to be paid back or defaulted upon......The taking on of debt was inflationary....ie it stimulated the consumer spending more than it should have.....so our GDP is bigger than it should be......when it gets paid back that will have a negative effect on GDP....ie ppls incomes....

The GReat Depression was a credit event of huge proportions, right now we have an even bigger debt....this points to an even bigger Great Depression mk2....that means huge losses in assets...

So we have you and Olly saying inflation and myself, Paul Krugman and Steve Keen saying depression/recession and huge house losses...In a depression cash is king.....its liquid and you can buy at firesale prices at the bottom....or you can stay in and wait 20+ years to get back to today....I know which way Im betting....

Rents up, sure as the ppl and businesses of Chch desert that city they have to go somewhere and the two other major cities make sense...If I was well off in Chch right now, Id be or have moved to Auckland or OZ.....like I said I think you need a good base to make judgements on........

Far brighter ppl than me say protect your wealth from the potential of huge losses.....right now I sit looking at a house bought for $500k that has been on the market for 2+years, best offer $360k.....so its rented out....in the other direction is a house with 2 acres of vines.....they have been removed and the house has been empty for 9+months....relations still trying to sell for 2 years, no offers.......from Blenheim to Karamea I see a lot of for sale signs......got to wonder.........

regards

by Matt in Auck | 22nd Jan 12, 10:43pm 1327225431

10% is 10%, a long way off 100% olly. There's an element of catch up in that rise. A long way to go to 100% by the end of 2013,olly.
As for a boom in house prices, i'd call a boom a 10% annual rise. Even housing bull SK only sees a 3% rise this year.
People have long memories mate

by Wolly | 23rd Jan 12, 7:02am 1327255326

Isn't it great....NZ almost wins the prize....

"New Zealand house prices have been identified as highly unaffordable in an international study, with Auckland's market only slightly better than London but less affordable than those in Los Angeles and New York." herald jan 23

The govt and the RBNZ will be so pleased with their handiwork...not that they will say so but the smiles on the dials...jeez oh dear it'll be drinks all round in the Beehive...

1.Cheaper finance with relaxed LVR regs

2. Abundant foreign dosh by way of the covered bond rort..

3.Landlord benefit subsidy driving up prices on properties.

4.GST hike destroyed building sector in regions driving up unemployment and boosting population move to Auckland which in turn drives up demand for housing there....

meanwhile it's the peasants who must rent, who have to pay out the taxes the rest of their lives, to enable the fatheads in the Beehive to dish out the pork to the landlords.....aint it great to me a member of the National Party...

JK's property will be worth more. Wonder how many tenants he can fit in.

by Kunst | 23rd Jan 12, 8:43am 1327261411

Wolly - as I stated on another issue.

Is the property bubble bursting with strong unemployment rate increase towards winter or is the demand for immigration of Westeners (UK, USA, Europe) coming to the rescue again ?

The Real Estate industry in New Zealand is proportionally to others far too dominant.

http://www2.careers.govt.nz/jobs-database/whats-happening-in-the-job-market/major-industries-in-new-zealand/

Here a comparison: Singapore

http://www.singstat.gov.sg/pubn/reference/mdsdec11/excel/topic6.xls#'T6.1-T6.2'!A1

There is no wonder why prices are high in New Zealand. Our economy isn’t balanced, but one sided not diverse enough. As a consequence dominant industry sectors cause high prices – e.g. agriculture products and real estate become increasingly unaffordable for Kiwis.

http://en.wikipedia.org/wiki/Monopolistic_competition

In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit. In practice, however, if consumer rationality/innovativeness is low and heuristics are preferred, monopolistic competition can fall into natural monopoly, even in the complete absence of government intervention.

by Nic the NZer | 24th Jan 12, 12:01am 1327316464

No, the realestate industry in NZ is plenty competitive. The reason property prices can't drop is that people don't want to make a loss on their mortgage (they will hold rather than sell if the price drops too far).

by Matt in Auck | 24th Jan 12, 12:38am 1327318710

Yep there will be scenes of orgy in the beehive ole wolls. JK and his mates will be just overjoyed that their central Auckland properties are not just holding steady but shooting up. A jolly good show. Who needs a real economy when you can have one based on trading pieces of shite?

by Matt in Auck | 24th Jan 12, 12:26am 1327318011

Disagree. Prices DID drop 10 %. I am sure people in USA, UK, Japan etc didn't want to make a loss on their mortgage either. The reason why prices aren't dropping in Auckland is because the economy is sick, requiring record low interest rates to try and resuscitate it. Which has helped stimulate housing demand. Bugger all housing construction isn't helping either

by Nic the NZer | 24th Jan 12, 12:45am 1327319141

Yes, I guess I should have qualified my statements a bit better. Interestingly look at the RBNZ debt figures, there has also been a significant drop in debt recently,

http://www.rbnz.govt.nz/keygraphs/Fig5.html

This highlights the relevance of debt levels to drive prices, I think. Though its not a trivial relationship between the two, there are other factors to.

However unless people are in default few will sell for less than their mortgage value. I think this puts a kind of floor to the house price, and is why most inflation acrues into the housing market. Other high debt sectors I think have a similar influence.

I was discussing market structures prior to financial crisis and didn't qualify this well. Once the crisis set in many people don't have a choice about selling at a loss.