Although home loan rates for a one year term are settling around a tight level, competitive pressures are opening up variances for longer fixed terms, and for cash incentives

ASB is the latest major bank to raise fixed home loan rates. They follow Westpac who moved some rates up yesterday - who in turn followed ANZ, and in this round were led by Kiwibank's limited move on May 30, 2022.

But with new mortgage application levels at unusually low levels, and the mortgage market now turning over essentially just with rollovers and refinancing, it is now a "protect your market share" game for banks, rather than a "grow market share" game.

And the new rates tend to reflect that, with offers for most terms settling down into very narrow bands.

BNZ is the laggard in this round, still with their changes unannounced. They will probably come very soon. And they too will probably settle at very similar levels of their main rivals.

A wild card in this environment is the 'cash back' incentives available. Kiwibank's recent expansion to a 1% offer for loans over $300,000 ups the ante from the previously accepted 0.7% cashback incentive level. Kiwibank also pushed out the maximum to $10,000. But they maintained tight claw-back conditions. Even so, Kiwibank's extension will draw their rivals into having to match them when pressed, and banks will work hard to find other margin-protecting strategies.

But generally, as Fitch noted yesterday, banks like periods of rising interest rates. This is when they should be able to build back margins. However, we should note that the RBNZ Dashboard data shows that overall bank NIMs (net interest margins) have not been declining. How much of that relates to their mortgage business is not revealed, but because all big banks are now essentially 'mortgage banks', you would have to assume that they have held their mortgage margins well. The big challenge now for banks is around 'volumes' of new transactions.

In the background, first it was the RBA, and overnight it was the ECB, either actually raising rates or signaling that their official policy rates are going up. Tonight, a high-side surprise from American CPI inflation may also drive upward wholesale rate pressures.

Our local wholesale swap rates (see chart below) have been trending up recently after they took a detour in the second half of May. They are back at those earlier levels and seem on track to push on higher.

Banks are also raising term deposit interest rates although not generally at the same pace as home loan rates. TD rate rises for the terms that Kiwis are comfortable using (6-12 months) are not rising as fast as for some other terms. We will have more on this in a separate analysis.

One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculator which is also 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. But break fees should be minimal in a rising market.

Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.

Fixed, below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at June 10, 2022	%	%	%	%	%	%	%
ANZ	4.95	4.85	5.15	5.35	5.65	6.35	6.45
	4.95 +0.46	4.85 +0.36	5.09 +0.24	5.35 +0.10	5.65 +0.10	6.35	6.45
	4.39	4.55	4.90	5.25	5.45	5.79	5.99
	5.10	4.85		5.19	5.39	5.55	5.79
	4.85 +0.26	4.85 +0.36	5.09 +0.20	5.19	5.49	5.79	5.89
Bank of China		4.45	4.80	5.10	5.40	5.70	5.90
China Construction Bank	4.35	4.45	4.85	5.19	5.45	6.15	6.35
Co-operative Bank	4.49	4.49	4.85	5.19	5.45	5.75	5.95
Heartland Bank		4.18		4.84	4.95
HSBC	4.49	4.39	4.89	5.15	5.39	5.69	5.89
ICBC	4.39	4.29	4.79	5.09	5.35	5.65	5.89
	4.65	4.55	4.89	5.19	5.39	5.79	5.95
	4.45	4.34	4.90	4.99	5.35	5.55	5.75