BNZ introduces an 18 month rate, while Westpac moves two 'special' rates, one up, one down

Both BNZ and Westpac have changed some key home loan rates.

BNZ have added an 18 month option which they have priced at a standard level at 5.09%.

No other BNZ rates have changed, and that leaves them with a 4.35% one year 'Classic' offer which is the lowest rate for that term among the major banks, plus a 4.39% fixed two year 'Classic' offer which is the lowest of any bank for that term.

Westpac have changed two rates for their key 'specials' offers.

They have matched BNZ in the two year space at 4.39% which is a -10 bps reduction for them. We should note that TSB Bank also has a 4.39% two year 'special', so that means three retail banks now offer that rate, allowing borrowers good alternatives for that term.

Westpac however have pulled back from their 4.49% three year fixed rate, raising it +16 bps to 4.65% today.

That leaves ASB as the only bank offering 4.49% for a three year term, albeit on their 'special' terms.

The lowest mortgage rate available from any bank is still HSBC's fixed one year 'Premier' home loan rate at 4.25%.

Swap rates have been range-bound since mid September and movements here do not underpin today's mortgage rate announcements.

But with the US Fed now almost certain to start a gradual rise in their policy rates, we have seen the 1-5 rate curve start to show signs of rising. Certainly the 2-10 curve has, today at a ten week high of almost 90 bps. The Fed changes may accelerate that.

At the short end however (1 year fixed and shorter), policy moves by the RBNZ will be more influential and markets are pricing in some chance of a fall in the OCR over the next few months. Not all analysts are convinced that will happen, especially if the US Fed starts raising rates, but there is almost no change the RBNZ will follow the Fed any time soon.

All this means that markets are positioning for low wholesale rates at the short end in New Zealand, but rising and steeper rates for longer terms and that means 2 to 5 years.

However, something borrowers don't look at a lot is the credit spreads. This is the risk premium banks pay over and above the wholesale rates to secure the money. The only proxy we have for these are the Australasian CDS spreads. These are for investment grade borrowers and the Aussie bank's paper is a major, but not only, part of this market. These spreads have been tightening over the past few months (tightening = falling), but the movements have been small. They are up about +15% from May, but down about -10% from September. These sort of shifts in this small-but-crucial component of bank money costs won't really shift retail rates a lot. In a credit crisis they can, but at present we don't have that.

Borrowers should always negotiate for lower than carded rates, especially if you have equity of 20% or greater.

Talking to your bank's main rivals and knowing what they will offer is the best way to start negotiations with your bank.

See all banks advertised, or carded, residential mortgage rates here.

These new fixed mortgage rates now compare across all banks as follows:

below 80% LVR	6 mths	1 yr	18mth	2 yrs	3 yrs	5 yrs
		%	%	%	%	%
	5.15	4.35	4.95	4.49	5.10	5.35
	4.85	4.39	4.49	4.49	4.49	5.09
	4.99	4.35	5.09	4.39	5.19	5.35
	5.19	4.49		4.49	4.85	5.35
	5.15	4.39	4.95	4.39	4.65	5.35
	4.99	4.35	4.49	4.49	4.85	4.99
	5.15	4.25		4.49	4.99	4.99
	4.99	4.35	4.69	4.49	4.79	5.29
	5.29	4.35	4.69	4.39	4.79	5.35

In addition, BNZ has a fixed seven year rate of 5.75%, while TSB Bank offers a fixed ten year rate also at 5.75%.