ASB cuts 1, 2 & 3 yr mortgage rates

Property

ASB, last of the big banks to move in current round of mortgage cuts, reduces 1, 2 and 3 year mortgage rates; Has lowest advertised 2 and 3 year rates

14th May 12, 5:29pm by Gareth Vaughan

ASB has cut its advertised fixed-term mortgage rates for one, two and three years in the latest move in a round of fixed-term rate cuts by the major banks.

ASB says its cuts, effective from tomorrow Tuesday May 15, see its one-year rate cut 45 basis points to 5.25% per annum, its two-year rate cut 30 basis points to 5.55%, and its three-year rate cut 35 basis points to 5.75%. At 5.75%, the three-year fixed rate is the same as ASB's advertised floating, or variable, rate with its one and two year fixed-term rates below the floating rate.

The cuts follow some to fixed-term rates by ASB's rivals ANZ, the National Bank, BNZ, Westpac, plus SBS Bank and TSB Bank last week and over the weekend since state owned Kiwibank introduced a 4.99% one-year "limited time, special" offer on April 26. Kiwibank says the special has been its most successful since it started offering limited time specials, that generally run for three weeks, early last year with NZ$110 million lent through the offer thus far, with half of this coming through winning customers' over from rival banks.

Despite the fixed-term rate cuts following recent falls in the swap, or wholesale, rates banks use for their own funding, the banks haven't dropped their floating, or variable, rates which the majority of mortgage customers are currently on.

“Changes in market conditions have meant that the cost to ASB of funding some of our fixed home loans has reduced, so we are directly passing on these savings to our customers,” said Shaun Drylie, ASB's general manager for products, retail and business banking strategy.

ASB's new one-year rate brings it in line with those offered by sister banks ANZ and National, plus Westpac. However, it lags the 5.20% rate advertised by TSB. BNZ has introduced a new 5.10% "classic" 18 month rate. Both ASB's new two-year and three-year rates are the lowest standard rates advertised for those time periods by a bank.

Fixed mortgage rates

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Source: interest.co.nz

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19 Comments

by MortgageBelt | 14th May 12, 6:08pm 1336975697

Tempting, tempting, temptation .... those fixed rates are looking tempting. But do you really want to lose your flexibility to change banks or fix quickly for longer if rates move up.

But maybe the entire economic system is on the verge of global collapse, in which case the banks won't be able give money away at 3%. So float into the meltdown (Stevens' scenario).

When will the floating rates move down as they should? They want to move some of those 60% floating to fixed for a reason & it ain't margins.

The assets that those mortgages are based on can only keep their value if rates fall to prop the whole package up. Good for borrowers.... while they have a job/income.

by moa man | 14th May 12, 7:27pm 1336980436

You lost your flexibility the moment you got a mortgage, Mr Belt. Your constant posts glorifying mortgages is an attempt to drag everybody down to the lowest common denominator. i.e In debt, lack of capital to begin a productive enterprise and constantly worrying what some "Bank" will do. NZ needs less residential property borrowers, not more.

by steven | 14th May 12, 10:02pm 1336989752

Pretty much, yes.........except Im not so sure on the Banks funding getting cheaper, it should but it might actually get impossible though hopefully for a short time only as money flees to safety ie USD. "Tempting" yes so I think this week Im going to fix for a year.....its not much $ either way in my case....a few K at most....its peace of mind / bufer in case of insanity.

Floating to fixed, yep I think its a sign that they want to reduce leverage. Or I wonder if they have got some lump sums in those senior debt units that are now allowed....but have to have a decent % of the borrowers with high equity....If its to reduce leverage then we might see some very low rates attracting ppl with say 50% max to borrow....

In the longer time frame (year or two) If its a depression and prices decline thats good for those who have saved and are living off it, also those who keep their jobs....at least thats how the Great Depression went. The problem will be the % that lose their jobs both in paying the mortgage / rent and the knock on effects....landlords might find that their tenants cant pay....in 1990s in the UK the Irish went back to Ireland...Im sure we have some % of work permits here who could end up on a flight home as work dries up..........it all adds up when it starts to go bad......

regards

by bigblue | 14th May 12, 8:51pm 1336985480

There has been so much chatter here that interest rates will soon rise and not too long ago predictions Reserve Bank will increase OCR, however can we now all simply accept that the OCR will soon be 2% and that floating and fixed mortgage rates will constantly decline for the next two years as swap rates plummet and housing will become more affordable than any time in the last 10 years.

by steven | 14th May 12, 9:45pm 1336988722

Some chatter on rises but 2 camps here, many such as myself said no, drops or static, The "market" finally is coming around to that, but I think its now moving on, they are behind the curve I suspect. My reasoning is thats the OCR, not the rate that banks get funding at and that is, or will be the problem. For the OCR to go to 2% (and it will i agree) it will imply we are well into a serious recession or depression not seen since the Great Depression with resultant climbing un-employment and collapsing Govn revenue. My worry is that we will see an [il-]logical flight to safety and that is the USD, bye bye NZ funding. So the NZD will drop back and badly and while the OCR will be rock bottom attracting foreign lenders I think (maybe only a short period ) be very hard....high un-employment will make the housing bubble deflate if not pop IMHO.

regards

by Grant A | 14th May 12, 10:06pm 1336989993

Steven, my view, if its a banking collapse or the alike in europe that triggers a 2% or lower OCR (rather than the RBNZ with a currency concern), then bank funding spreads will blow out substantially and we wont see any real downside in rates at all - if that occurs watch the money printing kick back into even higher gear globally, and then couple that with the resulting lower NZ dollar, inflation will start to appear on the horizon irrespective as to how bad the economies are performing - 1970's style but for a different reason. The floaters won't be quick enough

NZ Heads, do you truly think any banks tries to trick people into fixing because they think its going down ? Truly, do you really think that ?

by Grant A | 14th May 12, 10:22pm 1336990953

Not what I asked, I asked do you think economists deliberately try to trap people into fixing when they think its going lower ? Do you really think that they would very publically make such predicttions thinking differently, or perhaps do you think it may just be a case of them getting their forecasts wrong in the past 2-3 years ?

by Matt in Auck | 14th May 12, 10:52pm 1336992771

well the track record of economists is abysmal and TOny Alexander of BNZ admitted the other day that their predictions are "an article of faith" rather than based on any robust empirical foundations so in my view their views should be ignored

by Grant A | 14th May 12, 11:00pm 1336993235

I guess when we blog there are some things we all know alot about, and other things we perhaps have a more uninformed opinion on, but the joy of blogging is that you always find a few others who do know the facts in the areas where we are weaker. For all your words, let me clarify the answer to the question I asked as your'e clearly someone not informed on the question I asked you about - economists do not deliberately misinform, they just get it wrong sometimes, that is the facts

You raise another issue as to where rates should sit - bearing in mind that the OCR curently sits are 2.50% and bank bills at 2.80% above that (totally irrevalant because banks can't raise funds at that level), and that banks cost of funds is around 1.50% above that, you are suggesting that banks could operate their businesses on about a 5 basis point margin (0.05%) - you are obviously incorrect. And another point, if you compare what banks are charging as a total margin above the wholesale yield curve, their floating margin is actually slightly lower currently than fixed rates (2.8% against 3%ish)

So what I'd suggest Heads is that you get rid of the conspiracy theory you have because it may be distarcting you in understanding what really drives rates - base wholesale rates, funding spreads and competition.

by Grant A | 14th May 12, 11:02pm 1336993358

I agree with Tony on that Matt, it is only an opinion, and anyone who bets their house of the opinion of anyone, be it an economist or a blogger, asks for trouble - Tony's being honest

by Matt in Auck | 15th May 12, 12:13am 1336997608

I tend to disagree. Economists are portrayed (including by themselves) -whether rightly or wrongly - as qualified professionals who base their analysis and predictions on sound empirical analysis. By claiming that their predictions are to a large extent an "Article of faith" flies in the face of this image. As an engineer if my analysis and predictions were as wrong as economists then I would be sued many times over and out of work for life.

Their models are obviously seriously flawed. Read "The Black Swan".

The probelm is not they are sometimes wrong. The problem is the frequency with which they are signifciantly wrong. Personally, they are significantly wrong so often that I can't give the profession any respect what so ever

Mind you it's good Tony's showing some humility, and in recent times is pretty much throwing his hands in the air and admitting he doesn't know what is happening at the moment - that's a good answer, because that's the truth. After all, he did slam Bernard on his house price predictions. His predictions haven't been too bad mind you. Westpac have been shockers, consistently very wrong on GDP, unemployment and interest rates. And don't get me started on Treasury! Or how about Infometric's clanger of a house price prediction 2 or 3 years ago?

by steven | 15th May 12, 7:18am 1337023098

Agree....also as an engineer there is a more direct link to failure. Ppl can and do die, if you had ever been in front of the health and safety executive, well they go through your designs, maintenance schedules, training and competance to make sure you are not to blame. Then maybe they would understand just how gob smacked I am on how bad and how incompetent, politisised and blinkered many economists seem....

NB GrantA is a gold and inflation bull I believe, same un-shakable belief, same school of economics outlook.......but given Greece and JPMorgan's losses fixing for a year actually makes some sense to avoid short term termoil/spikes IMHO......think I will this week.

regards

by Grant A | 14th May 12, 11:05pm 1336993526

Heads - the Westpac guys changed their call to stay floating when the market started to price in a rate cut. They could well regret that change of view sometime in the future, but who knows, that is the point, you don't rely on forecasts

by steven | 15th May 12, 7:23am 1337023383

Yet of course you are an inflationista....so refuse to consider my point of view as a deflationista.....

;]

The economic trend is a recession/depression and deflation...what might happen as we meet the inflection point however is material......so fixing to avoid that makes some sense.......at least I cant see a downside...except maybe lose a few $s.

regards

by MortgageBelt | 15th May 12, 7:07am 1337022464

Nz Herald this morning has ASB cleverly manipulating the peasants fear by warning how house prices are increasing therefore Bollard wont,t drop OCR, or may increase. Then asks the fear question "could you pay your loan if rates went up 3%."? Yeah right. We can all envisage floating at 9%.

by steven | 15th May 12, 7:26am 1337023577

Interesting.....I assume the ASB see's the OCR dropping and then punters will expect them to follow, yet their funding isnt OCR based...maybe its "panic".......

regards

by MortgageBelt | 15th May 12, 7:12am 1337022739

If Bank Economists wanted to be honest they would say: Yes, we admit the NZ economy is pretty sick, our graduates cant get jobs, our lending is down, looks like rates will be lower for longe"r. IF they keep threatening hikes then no wonder they can,t lend out their money.

by MortgageBelt | 15th May 12, 7:15am 1337022949

How many followed Westpac advice to fix 3 months ago? He advised "Fix at 6.2% for 2 years as its going to be better than ffloating" Maybe ask for a refund on that advice...

by MortgageBelt | 15th May 12, 7:19am 1337023171

Maybe the banks actually don,t really know what is happening globally? They may be experiencing their own internal panic ... the spreadsheet models not working.