ASB introduces lowest 5-year home loan rate among the major banks ahead of RBNZ's OCR review

ASB introduces lowest 5-year home loan rate among the major banks ahead of RBNZ's OCR review

ASB has introduced a new five-year home loan interest rate of 6.85%, which gives it the lowest advertised, or carded, rate among the big banks.

ASB says its new "special" five year rate applies to new and existing lending for customers who have at least 20% equity, an ASB credit card and have salary or wages credited to their main transaction account with ASB.

Its standard five-year rate is 7.40%.

ASB has also trimmed four basis points off its two-year fixed rate special, dropping it to 5.85%.

Borrowers also require 20% equity to get that rate.

“This new five-year fixed term special provides customers with a great rate and certainty over the long term as we approach the Reserve Bank’s review of the Official Cash Rate on 12 June,” Shaun Drylie, ASB general manager of product and strategy, said.

SBS Bank currently has the lowest carded five-year bank rate at 6.79%.

Other banks' standard, carded five-year rates range from 6.89% to 7.40%.

See all banks' carded, or advertised, home loan rates here.

The ASB rate changes took effect from 5pm on Friday, June 6.

This is how the new ASB mortgage rates compares:

below 80% LVR 1 yr 18 mths 2 yrs 3 yrs 5 yrs
5.95% 6.19% 5.85% 6.55% 7.40%
ASB 5.85% 5.99% 5.89% 6.25% 6.85%
5.85% 5.99% 5.89% 6.25% 6.99%
Kiwibank 5.85%   5.85%* 6.29% 7.20%
Westpac 5.95% 6.14% 5.85% 6.25% 6.89%
Co-op Bank 5.85% 5.85% 5.85% 6.25% 6.89%
HSBC 5.59%   5.99% 5.99% 6.99%
5.70% 5.85% 5.99% 5.95% 6.79%
TSB Bank 5.70% 5.85% 5.80% 6.50% 7.20%

* only as part of their 60/40 'special' deal. Otherwise 6.19%.


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Australia offers 5.30% on 5 Year fixed mortgage rate.
NZ OCR is only marginally higher that Australia. 

What effect does the OCR have on the cost of funds that the banks are required to hold for their 5 year fixed mortgages ?

Nothing perhaps,  but always a good excuse before and after an OCR announcement for banks to shift their fixed rates around.    OCR movements also provide marketing opportunities to get customers to lock in....
also there is a clustering effect around the floating rate.  So fixed rates are pitched at people who are floating to incentivise them.   So actually the OCR has an indirect effect on all kinds of retail rates. 

The question is: Why such a large gap between  NZ mortgage rates and Australia mortgage rates. Cost of funding is similar.

perhaps because the banks here are trying to improve their return on equity.
It is, on average, only about 14%.
They are simply trying to improve the return to shareholders.
Capitalism at work.