ANZ to increase floating mortgage rates by 25 basis points and flagship savings account rate by 25 basis points

ANZ to increase floating mortgage rates by 25 basis points and flagship savings account rate by 25 basis points

Hot on the heels of today's 25 basis points increase to the Official Cash Rate, the country's biggest bank has unveiled increases to its floating and flexible mortgage rates and "Serious Saver" savings account

The increase will see ANZ's floating mortgage rate rise to 5.99% from 5.74%, and its revolving credit 'Flexible" rate will rise to 6.10%.

The change is effective from 17 March for new borrowers, and from April 1 for existing lending.

The Serious Saver change is also effective from April 1, seeing that interest rate rise to 4% from 3.75%. See details on all banks' bonus savings accounts here.

Fred Ohlsson, ANZ's head of both retail banking and business banking, told interest.co.nz about 240,000 home loan customers are affected, and more than 1.3 million customers with savings accounts with ANZ will benefit. Ohlsson was keen to emphasise a rising interest rate environment is good for savers.

"This is good for people who have savings. This is good for a lot of our customers and we have many more customers that are reliant on savings as an income than people with a mortgage," Ohlsson said. "Borrowers have enjoyed three years of all time low (interest rates), I think it's fair to say. The same way a lot of our retirees and people who rely on savings as sole income or additional income have consequently not enjoyed the low rate environment for the last three, four, five years and that is changing too."

Ohlsson said there were no changes to ANZ's short-term fixed mortgage rates, such as six month and one year rates, at this stage. The bank did increase these rates just last week, however, by 14 basis points for fixed-term six month rates, and 20 basis points for one year rates. See all banks advertised, or carded, mortgage rates here.

Both fixed-term mortgage rates and term deposit rates were reviewed all the time, he added. He said it was too early to say whether ANZ would pass on OCR rises in full, in what's expected to be a series of increases from the Reserve Bank, to both borrowers and savers.

"It's not just the OCR that sets our funding costs," Ohlsson said. "The reality is in the last three to five months funding costs have gone up in anticipation of what the Reserve Bank did today. They've increased quite differently depending on the term. I would say the market is now well and truly anticipating 200 basis points (of OCR increases) in the next two to three years."

He added that although the majority of the 200 basis points of increases was likely to be passed on to both borrowers and savers, "we have to wait and see." Ohlsson also pointed out that ANZ increased term deposit rates late last month.

See all banks advertised, or carded term deposit rates here.

Here's ANZ's statement 

We will be increasing interest rates on Floating and Flexible home loans and our headline deposit product, Serious Saver by 0.25% p.a. The new rates take effect from 17 March for new Floating rate lending, and 1 April for new Flexible rate lending and all existing lending. The increase to the interest rate for Serious Saver takes effect from 1 April.

Retail interest rates are determined by a range of economic and market factors, of which the OCR is one. Borrowers have enjoyed historically low interest rates for a long period. The interest rate cycle is now turning as the economy gears up for a period of significant growth.

As a result, the cost of funding for lenders is increasing, which has to be taken into account when setting interest rates. These factors are reflected in today's rate changes for variable home loans and savings. While this means that interest costs for our Floating and Flexible home loan customers will increase, more than five times as many (more than 1.3 million customers) will benefit from increased interest rates on savings accounts held with ANZ.

The Reserve Bank has signalled a series of OCR rises over the next couple of years, which are expected to help curb rapid house price rises in Auckland. This will further affect interest rates for New Zealand consumers. It would be sensible for anyone who has a home loan, or is considering one, to ensure their budget is structured so they can comfortably manage further increases in interest rates.

These ANZ changes will mean that a 25 year loan will see payments rise by about $15 per month for every $100,000 borrowed.

Loan amount Previous floating New monthly
indicative only ANZ payment ANZ payment
$100,000 $   629 $   644
$200,000 $1,257 $1,287
$300,000 $1,886 $1,931

You can work out your mortgage payment changes using our mortgage calculator.

ANZ's new floating rates compare with their main rivals as follows:

below 80% LVR Floating Revolving
    Credit
5.99% 6.10%
ASB 5.75% 5.75%
BNZ - Total Money 5.74% 5.99%
BNZ - Standard & FlyBuys 5.99% 5.99%
Kiwibank 5.65% 5.65%
Westpac 5.64% 5.75%
     
Co-op Bank 5.70% 5.70%
HSBC 5.99% 5.99%
SBS / HBS 5.65% 5.65%
TSB 5.79% 5.79%

--------------------------------------------------------------

Mortgage choices involve making a significant financial decision so it often pays to get professional advice. A Roost mortgage broker can be contacted by following this link »
--------------------------------------------------------------

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

26 Comments

Comment Filter

Highlight new comments in the last hr(s).

Told you  yesterday ......ANZ will be first out of the blocks , the rest will follow suit
And I was challenged about this

In fact , its exactly as I said it would be , for existing borrowers it will be effective from 1 April
And
The letters to mortgage holders  will be in the mail before the  6.00pm cutoff today .

Obiviously, RBNZ hadn't consulted the govt over the rate hike! It's going to be bad for the election.  RBNZ just gave more ammunition for the opposition parties.

Why is a growing economy bad for the election ?
Why is a higher return on savings bad for those with savings ?

it's depending what colour you preferred.
Red: you pay more and less spending on food for the families/kids.  
Blue: Economy is doing well, more pay in pocket, only small rise in OCR.. good days ahead
Green: it's all doomed and NO YOU CANNOT DIG UP THE GROUND. Give me my flag back!

ANZ are being so  "TRICKY " with the increased interest rate for savers that their corproate colours should change from Blue to Red .
The only savings rate to be increased is for the seriuos saver account which you cannot draw from.  
I doubt its a popular account with Kiwis  because if you make even one withdrawl from  the seriuos saver account , you forgo the interest  

There are always ways around.

  • Withdraw all savings from the serious saver on the first of the month
  • Use what you need and put the rest into an on call savings account till the end of the month
  • On the first of the following month, transfer the savings from on call back to the serious saver

 
Lose maybe 1% interest for a month.

The problem is that now you have to wait for the bank to clear the money, which can take days. They blame the new money laundering laws for the delay. Although apparently if you need the money urgently for a house purchase, they can clear it straight away.

ANZ are being "TRICKY " about another thing too.
Their  statement says " funding costs for lenders are increasing...... " leading to this increase.
 This is the ugly , unaccpetable face of INFORMATION ASSYMERTY .
They dont tell us what their funding costs are , and in the consolidated published accounts its all but impossible to work out .
Their website gives some info away, but not much  
They need to front up as to how much the borrow tfrom the RBNZ at 2,75% to balance their ALCO (lending book)  each day.
I would suggest that their funding costs are not dependant on the OCR to any large extent , because they have access to depositors funds from as low as :
 

  • ZERO on cheque accounts
  • ZERO on transactional savings accounts
  • As low as 1% on low balance accounts of up to  $99,000.00
  • Most of their interest bearing savings accounts are around 1%

As I said yesterday my thirty years of property ownership experience has taught me two things when looking back;
 
1. It is all about timing and us baby boomers have been lucky. We are the luckiest generation in terms of timing and if we were sensible and shifted around and upgraded housing over the last two or three decades then we are generally very well off today. We have lots of equity and no personal debt to deal with. My children and their children will not be as fortunate as us. They have to borrow stupid amounts to get anything reasonable in Auckland especially whereas I for example borrowed $45,000 for my first home and had it paid off in no time.
2. As interest rates go up house sale volumes will drop and prices will drop. Watch this space. There can be no alternative. Some prospective borrowers will lose the confidence to borrow like they have of late and the banks will not be so confident to lend people the stupid amounts of late.
 
It is a good time to have no personal debt and a bad time to involved in real estate with excessive amounts of debt

Gordon, the vast majority of property investors in NZ are baby boomers, they also have generally little or no debt. I'd guess most are not even aware that there has been a OCR increase.  Which is why rising rates will again have less effect than everyone expects; just like in the naughties boom where prices were still increasing with 10% interest rates.  That boom only ended because of the GFC not rate hikes, I agree there is a point where rate hikes will bite but not anything sub 10%. You also have to consider that some will save more, both domestic and international bank customers,  this gives the banks more funding, more capital adaquacy and more ability to lend. Increased interest rates simply pump more debt into the system.
It's long been argued that interest rate rises are becoming a antiquated tool for the control of house price inflation, not least because of the detrimental effect on the broader economy. If this or any govn were serious about curbing house price inflation they wouls cease population growth, build x number of houses and problem solved.  Our debt/growth based economy ensures,  nay guarantees, further house price rises. 

Happy - not entirely accurate on the 2000's - Growth was dropping sharply from Sep 2007 (3.6%) and was at 0.5% and still falling when the GFC struck by Sep 2008. Bollard later admitted that the RBNZ had erred in 2003/04 in not hiking early and by enough, and accordingly had to take the OCR to 8.25%, and Kiwi with it, in a real catch up in the latter period when inflation got to 5%. Its the point several of us have been trying to make, be late and too soft, you have a much bigger problem for borrowers further down the track.

I think the point is, we are not at the 2007 part of the cycle yet (OCR is not peaking).  We are likely at the 2004 part of the cycle when OCR is first hiked.  So 3-4 years before rates get a point where growth gets lowered to 3%, 0.5%?  A lot of area under that graph of capital gains still left to be had...

Thats true Simon in terms of interest rates but not true in terms of house price to income levels - at the start of the 2000's that ratio was closer to 3 times, now its above 7 times in Akld i.e. property prices have been hugely supported by historic low interest rates that are now on the rise. Probably on a rise to a much lesser high than normal, partially because of this fact, but nonetheless something that's going to be a big headwind I suspect that might out weight net migration and other positive factors over the next yeasr or two - but I'm not a property expert, plenty on here better able to express opinions on that.

Using these graphs:
http://www.interest.co.nz/charts/real-estate/first-home-buyer-affordability
Looks like you have a point with regard to auckland, already at affordability levels last seen in 2006.
But for NZ overall, Manawatu, Wellington even, you have to go back to 2004 in the last cycle to get comparable affordability.  These regions didnt see the price rises over last few years, and will likely cope with a couple of years of rate rises, and if like last cycle,  will attract higher yield seeking investors from auckland

The govn and the reserve bank are still between a rock and a hard place, they need a low NZD on one hand which would be achieved by a low OCR. On the other hand they need to curb inflation which wouls (arguably) be achieved by a high OCR. So they're damned if they rise and damned if they don't.  So they have correctly picked the middle ground of small rises which will have only a small effect on NZD and only a small slow down on inflation and house prices. House prices are more complex when you start seperating the regions as Auckland for example will behave differently to PN.  And even suburbs within a city will perform differently, as we're already seeing in Auckland.  So my guess is house prices in Auckland will continue to increase but at a lower rate and probably peak in 2016 then flatten or fall a little in 2017. 

Hi Grant, the sub prime crises kicked off in the US in late 2007 which would account for your dropping in gdp growth and house prices from that point.  By Sept 08 the gfc was well under way and it was these two events that halted growth, not interest rate rises.

Happy - I agree, Bear Stearns was 2007 but the impact upon economies certainly wasn't before then, and it takes some time to impact GDP numbers anyway so it was obvious something else was the problem before then. High interest rates and NZD was what did the damage and it happened because of the RBNZ earlier mismanagement - they'd have loved to known back in 2006-08 that a GFC was coming, and we wouldn't have got to those extremes of a 8.25% OCR, but they didn't, most didn't. 

Increasing interest rates have not cause a decrease in house prices in the past.  What actually happened during the last cycle when rates began rising from 2004-2008 was a reduction in the rate of increase in values in auckland to around 0-5%   (after initial double digit increases just as we have seen in the past couple of years), and higher yielding secondary cities that did not see a value increase intially then rocketed as rates rose (e.g p.n property 2004-2006 increased around 20% each year to 'catch up').  Infact at 10% floating in 2007 house prices in palmy were still up double digits year on year.  7 years of flat prices in the secondary cities now have them lagging auckland and showing attractive yields and I expect will once again attract investors whose equity has increased dramatically over the past few years.

You are asserting that baby boomer property investors will pick up the slack of both excluded first time buyers (LVR) and the reduced buying power of mortgaged buyers (higher interest rates). Given that sales are already falling dramatically, I think that's unlikely.
The market is cyclic, but those with vested interests always think it's different this time round. 

I think FHB will still be active in the market just at lower price brackets. I think second home buyers will still be active and I know investors are active. This time around will be very similar to all the other cycles, strong price rises then a platueu or small fall. Its painfully predictable, thats the whole point, its meant to play out the same every time, the system is systemic and in a growth based system price rises become systemic and inevitable.  

Totall agree Gordon, happy to continue to rent in Auckland and save that deposit - and sail around on the best harbour in the world on weekends. Looking at new rental accomdation recently - still ots of choice and no sign of any rental increases. 

Ditto. Rents are stagnant or even falling a wee bit in the areas I watch in the eastern bays. Deposit is growing quite nicely with the cheap accomodation costs - higher interest rates are a nice little bonus.

Frazz I am happy for you .Us baby boomers have really stuffed it up for you  and your generation. Good luck with the saving. I hope the market at the very least slows down for you if not drop in value. 

Thanks..we hold no grudges, most people I grew up with now live happly North, Coromandell, Tauranga and overseas. Auckland will only get more expensive and unfortunetly I see rates becoming a big problem. Mortgages (French transaltion " Death Warrant")? To those PI's who have done well over the last 30 years well done...just remember you cant take it with you.
 

Slow to drop rates and blindingly fast to raise them......