BNZ is the last of the main banks to trim fixed home loan rates, taking its six month and one year carded rates down in the same manner as ANZ who started the recent realignment.
So, where has the market ended up?
After the changes of the past 12 days, started by ANZ on May 2, all the big banks are back in line. The variation between them in the hotly-contested space of fixed rate for 1 year and less, is again very minor. Perhaps Westpac is slightly out of line being +10 bps higher than the mid-point.
But Kiwibank seems to have successfully occupied the 6.99% rate level alone for a one year carded offer. It is there with TSB and the Bank of China as the other two challenger banks. Heartland's online-only no-mortgage-broker 6.89% is the only better rate.
And Westpac is making a play at the three year fixed rate position, offering 6.39% and it basically has this position to itself. That rate is -60 bps lower than Kiwibank's one year carded offer. SBS Bank has a 5.99% three year rate offer. It would be interesting to know how much attention these are grabbing.
By our figuring, taking 6.39% for three years now instead of the 7.14% offered by the other big Aussie banks for one year, and trusting rates will be much lower after May 2025 and 2026, means for a $450,000 mortgage that will require repayments at $2,812/month now versus the $3,036/month by taking the one year option. That is a saving per month of $224. Over the first year, that builds to a $2,688 saving by taking the three year rate now. You are guessing that rates in May 2025 will be lower. A two year fixed rate would have to fall to 6.00%, or that for the one year rate for each of those two out-years. That is down -115 bps, and if that happens you are no worse off taking the savings from the 3 year rate now, than achieving the future 6% one or two year rates. (You wouldn't be ahead until those future short rates fell to 5.9% or lower.)
What's the chance? Worth taking the gamble?
Two additional points are worth making. First carded rates are less relevant these days. Bank apps offer good discounts to existing borrowers who are ready to roll over their interest rate contract. A few simple clicks and you are done, probably with a lower-than-carded rate. That 'simplicity' discourages competition, especially when you feel you got a 'good deal' from a 'lower rate'. Please note the current discount offers from these apps in the comment section below if you know them.
And secondly, the shift short is raising the power and influence of the RBNZ's monetary policy to affect household budgets. The rush short means far more loans will be affected by RBNZ rate revisions when they come. Today markets are pricing in about two -25 bps OCR cuts in 2024. The OCR does have influence on wholesale pricing out to about 12 months, much less for longer terms. (Perhaps some of the recent retail rate falls can be attributed to the shifts already at the wholesale level.)
BNZ did not announce any changes to its term deposit rates with today's home loan rate changes.
One useful way to make sense of the changed home loan rates is to use our full-function mortgage calculator which is below. Term deposit rates can be assessed using this calculator.
And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options. Break fees will be minimal in a rising market. But they become important in a falling market however.
Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment. Update: adds SBS Bank change.
| Fixed, below 80% LVR | 6 mths | 1 yr | 18 mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| as at May 14, 2024 | % | % | % | % | % | % | % |
| ANZ | 7.25 | 7.14 | 6.89 | 6.79 | 6.65 | 7.34 | 7.34 |
 |
7.24 | 7.14 | 6.89 | 6.75 | 6.65 | 6.49 | 6.39 |
 |
7.24 -0.05 |
7.14 -0.10 |
6.89 | 6.79 | 6.65 | 6.55 | 6.55 |
 |
7.25 | 6.99 | 6.79 | 6.65 | 6.55 | 6.55 | |
 |
7.29 | 7.24 | 6.95 | 6.75 | 6.39 | 6.39 | 6.39 |
| Bank of China | 7.09 | 6.99 | 6.75 | 6.65 | 6.49 | 6.39 | 6.39 |
| China Construction Bank | 7.19 | 7.09 | 6.89 | 6.75 | 6.49 | 6.40 | 6.40 |
| Co-operative Bank | 7.29 | 7.14 | 6.99 | 6.79 | 6.65 | 6.55 | 6.55 |
| Heartland Bank | 6.89 | 6.69 | 6.55 | 6.35 | |||
| ICBC | 7.19 | 7.05 | 6.79 | 6.75 | 6.59 | 6.49 | 6.49 |
 |
7.35 | 7.14 -0.10 |
6.99 | 6.69 | 5.99 | 6.19 | 6.19 |
 |
7.39 | 6.99 | 7.19 | 6.75 | 6.65 | 6.59 | 6.59 |
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15 Comments
They are essentially funded from the short-term wholesale markets (90 day bank bills), and these have been remarkable stable, shifting only when the OCR moves. And the OCR hasn't moved since May 25, 2023. Further, no-one expects it to shift either at the next OCR review on May 22, 2024. So expect floating rates to stay at this level until at least September at the earliest.
Yes, except they move them Higher, even when the OCR is not going up.
I am pretty sure they went up about .5% with no OCR movement last year.
Easy money for them with very high and increasing margin, easy money for them, easy to go up and very very grudgingly do they go down.
A prime example of the Ausie banks ripping New Zealanders off.
There should be a commission of inquiry on this, look at the Floating Rates the same banks are charging in Ausi and you will be very surprised.
Look at the variance in on call rates for savers compared to floating rates charged, not all funds are short term funding or OCR driven.
It is a crime.
You are not doing a very good job David of explaining this, perhaps an article from you, or do you guys need Cunningham from Squirrel to do all the hard work.
The best mortgage terms and rates always appear in the rear view mirror.
Possibly in the past banks set their mortgage rates based on a margin over funding costs across the different terms but nowadays the mismatch in their deposit and lending terms means the banks are basing their interest rate offerings on their own analysis of the future while maintaining their competitiveness. Good luck to any individual who thinks they can beat the banks at their own game.
Hmm. Still quite high, and at around 90 BPS between 1 year and 3 year, perhaps the banks are trying to get people locked into the longer term rates knowing they will be falling?
The present doesn't bother me. I locked in 4.89% early 2022 for 5 years. The question is whether they will fall much over the next 3 years. Would really like to refix at the same, or lower, rate.
Of course, I'm very much aware that the money the bank borrowed to lend to me is probably costing them around 2.5%. The daily swap rate has no significance once the loan has commenced.
When that refix date comes around, I will be sure to actually have a conversation and not just pick some automated rate offering. Always push your bank.
Please note the current discount offers from these apps in the comment section below if you know them.
Just coming up for a refix with ANZ and these are the current rates on offer online:
6mth - 6.99%
1yr - 6.85%
18mth - 6.69%
2yr - 6.75%
3yr - 6.65%
4yr - 6.54%
5yr - 6.39%
Personally, I'm of the view that rates will fall, and quite a bit more than the 'experts' (aka Sharon 'two more rate hikes' Zollner. How she's still in a job is beyond me...)
Agree with Tron, this is good news (for borrowers) and likely more so if we do nudge down into the 5's next year as I'd not be at all surprised to see happen.
However, with the delayed effect of higher rates still to fully filter through, announced public sector & weakness induced private sector job cuts yet to hit, meeting still insanely high net immigration head on, I can't see lower rates having much of a positive effect on house prices for quite some time.
I'm picking lower rates and lower house prices in tandem well into next year...
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