Two more of New Zealand’s biggest banks have cut their mortgage serviceability test rates.
ASB, NZ's second largest mortgage lender, has cut its home loan test rate from 8.7% to 8.1%, a decrease of 60 basis points.
“Following our recent decreases across our fixed and floating [home loan] rates, we have now updated our test rate,” an ASB spokesperson told interest.co.nz.
BNZ confirmed it has also trimmed its home loan test rate by 50 basis points from 8.5% to 8%.
Banks use mortgage serviceability test rates to gauge the repayment capacity of would-be home loan borrowers’ if interest rates rise. A lower test rate increases borrowers' borrowing capacity.
Westpac NZ, ANZ NZ and Kiwibank were quick to trim their home loan test rates after the Reserve Bank cut the Official Cash Rate (OCR) earlier in October.
The Reserve Bank cut the benchmark interest rate from 5.25% to 4.75% after deciding annual inflation was now within its 1% to 3% target range.
ANZ NZ, the country’s biggest mortgage lender, told interest.co.nz on Friday it was still testing at 8.05%, the bank’s test rate since October 15. Its test rate was previously sitting at 8.5%.
Westpac NZ confirmed its test rate remains 8.15%, having been cut from 8.65% after the Reserve Bank’s latest OCR decision.
Kiwibank's test rate remains at 8% after a reduction from 8.5% last week.
Among the smaller banks, the Co-operative Bank wouldn’t reveal its current mortgage serviceability test rate, but a spokesperson told interest.co.nz the rate had been adjusted following the latest OCR announcement.
The Co-operative Bank had home loan exposure of $3.024 billion as of June 30.
TSB Bank’s Product and Marketing General Manager Nick Herbert said TSB had reduced its home loan test rate to 7.9% following the OCR. TSB had home loan exposure of $6.408 billion as of June 30.
An SBS Bank spokesperson said the bank was planning to apply an 8% test rate from the start of next week.
The spokesperson said SBS Bank regularly reviewed its test interest rate, along with other relevant components of its affordability calculator.
SBS Bank had home loan exposure of $4.340 billion as of June 30.
Mortgage test rates are falling back as mortgage rates and the OCR are coming down. However, sharp interest rate rises from the record lows of 2020-21, meant by May 2023 the Reserve Bank estimated about 25% of outstanding mortgages by value were stress tested by banks at lower interest rates than were then prevailing.
ANZ NZ's test rate reached 9.1% last year, having been as low as 5.8% in the 2020-2021 period.
The latest mortgage figures out of the Reserve Bank showed the value of new mortgage commitments rose 6.9% in September compared with August. The Reserve Bank said in total there were 17,298 new mortgage commitments in September, up 2.6% from 16,865 in August. In September 2023 there were just 14,969 commitments.
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