The lowest carded, or advertised, mortgage rate in the New Zealand market may be ending soon.
HSBC has one of the lowest fixed rate cards in the New Zealand mortgage market, and its 18 month Premier 'special' is pitched at 3.95%.
It was launched on February 17, and if HSBC follows the pattern of last year, the offer will expire soon.
The bank has a recent habit of targeting its best rates in the post-New Year months, and returning with a market leading offer in the Spring selling season.
Glen Tonks, HSBC's head of retail banking, told interest.co.nz the bank had "double digit mortgage growth" in last year's campaigns and this year's reprise has "exceeded our expectations".
HSBC now has a mortgage book exceeding $1.2 billion and is determined to grow that.
The bank is focused on growing market share in its target market, which is defined as "mass affluent customers, with incomes over $120,000, and who have international needs". This is where the Premier criteria is aimed.
These types of clients are very active. "The nature of our customer base is that they are always doing something," he said.
Tonks reiterated that the 3.95% rate "is profitable; its not a stunt at all."
"We are no different to other banks" in the way HSBC is funded, he claimed, and could offer no reason why rivals have shied away from matching the 3.95% rate.
Shortly after HSBC launched its 3.95%, 18-month rate, the Co-operative Bank CEO Bruce McLachlan told interest.co.nz the fact no other bank had matched the interest rate suggested other banks were saying they couldn't make money at 3.95%.
Since HSBC locked in the funding for this campaign, one and two year wholesale swap rates have fallen substantially, especially after the surprise Official Cash Rate cut on March 10.
| Wholesale swap rates | 1 year | 2 years | change from 1-Feb-2016 |
CDS swap spreads |
| % | % | bps | index | |
| 1-Feb-16 | 2.60 | 2.63 | 140.5 | |
| 17-Feb-16 (HSBC campaign launch) | 2.57 | 2.54 | -9 bps | 160.4 |
| 1-Mar-16 | 2.43 | 2.40 | -23 bps | 154.9 |
| 1-Apr-16 | 2.19 | 2.20 | -34 bps | 120.2 |
This has raised the likelihood that rivals will soon also offer sub-4% rates, but HSBC's positioning to have a market-leading rate card is unlikely to change.
"We are very much in growth mode. NZ is an important market for us and we are committed to it," said Tonks.
He claimed that the majority of HSBC's new business was due to the 3.95% 'special'.
Not only is 3.95% a low for the New Zealand market, it is low when compared with HSBC's fixed rate mortgage offers in Australia. In fact, no other bank there offers fixed rates this low.
The unedited conversation with Glen Tonks is here.
Here is where fixed rates stand now:
| below 80% LVR | 1 yr | 18mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| % | % | % | % | % | % | |
 |
4.25 | 4.89 | 4.35 | 4.99 | 5.20 | 5.30 |
 |
4.15 | 4.15 | 4.39 | 4.65 | 5.00 | 5.15 |
 |
4.25 | 4.99 | 4.39 | 4.64 | 4.99 | 5.15 |
 |
4.29 | 4.25 | 4.75 | 4.90 | 4.99 | |
 |
4.25 | 4.95 | 4.39 | 4.80 | 5.09 | 5.19 |
 |
4.25 | 4.35 | 4.35 | 4.65 | 4.89 | 4.99 |
 |
4.25 | 3.95 | 4.39 | 4.59 | 4.79 | 4.99 |
 |
4.10 | 4.35 | 4.29 | 4.65 | 4.99 | |
 |
4.35 | 4.35 | 4.29 | 4.79 | 5.35 | 5.35 |
In addition, BNZ has a fixed seven year rate of 5.55%, while TSB Bank offers a fixed ten year rate at 5.75%.
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