Kiwibank has announced some home loan rate changes that will become effective on Monday.
It is raising its one year fixed home loan 'special' rate by +6 bps to 4.35%.
And it is cutting its two year fixed home loan 'special' rate by -10 bps to 4.39%.
These changes come after HSBC launched its new eighteen month Premier fixed rate 'special' of just 3.85% which is a modern all-time low offer. (Some customers claim - in our Comment stream - they have even acheived a rate of 3.79% after negotiation with HSBC, but these reports are unconfirmed.) HSBC says its new low offer has met with "a strong response".
But Kiwibank's changes are more focused on having a meaningful difference with the offers of the big four Aussie banks.
Kiwibank's new one year rate at 4.35% will still be lower than most of their Aussie rivals, even after the rise. But the advantage will only be 4 bps - and it is pitched at the same rate ANZ is promoting.
For the two year term however, they will have a good advantage against all those rivals. Each of them has a 4.55% rate, so Kiwibank will start the negotiation with a 16 bps advantage.
However, you do have to wonder how long that advantage will last. Today, a two year swap rate is 2.23%, and while any bank borrowing in wholesale markets will pay a premium to that, the margin-to-swap is 2.16% which is lowish in the perspective of the past few years, but far above margins-to-swap of a decade ago. In a winter market that is relatively low volume, maybe the downside risks are low for banks, but to make a meaningful move in market share, you would think that there is plenty of wiggle-room for negotiation at that level. Kiwibank would want it's advantage to move its needle, otherwise why would they do it?
Kiwibank's 'specials' require at least 20% equity in the securing property.
See all banks' carded, or advertised, home loan interest rates here.
Here is the full snapshot of the fixed-term rates on offer from the key retail banks.
| below 80% LVR | 6 mths | 1 yr | 18 mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| as at June 6, 2018 | % | % | % | % | % | % | % |
 |
4.99 | 4.35 | 5.15 | 4.55 | 4.99 | 5.89 | 6.09 |
 |
4.95 | 4.39 | 4.49 | 4.55 | 4.79 | 5.39 | 5.59 |
 |
5.35 | 4.39 | 5.05 | 4.55 | 4.99 | 5.89 | 6.09 |
 |
4.99 | 4.35
 |
4.39
 |
4.85 | 5.19 | 5.39
|
|
 |
5.25 | 4.39 | 5.15 | 4.55 | 4.94 | 5.89 | 5.59 |
 |
4.80 | 4.29 | 4.45 | 4.55 | 4.89 | 5.39 | 5.59 |
 |
4.85 | 4.19 | 3.85 | 4.29 | 4.89 | 5.29 | 5.59 |
 |
4.99 | 4.29 | 4.59 | 4.55 | 4.99 | 5.49 | 5.55 |
 |
4.85 | 4.29 | 4.39 | 4.55 | 4.89 | 5.55 | 5.69 |
In addition to the above table, BNZ has a fixed seven year rate which is 6.15%.
And TSB still has a 10-year fixed rate of 6.20%.
8 Comments
Banks want mortgage book growth which has been a major driver of profit growth but now mortgage lending growth is slowing, and in the complete absence of any innovative new products, the only way they are going to chase that is by compressing their margins. In a way many banks are probably over-reliant on residential lending.
You guys sound like you've negotiated some good rates. Are those rates for interest only loans, I'm guessing no? I'd like to see some current statistics on interest only leaning. I know Australia is having a huge crack down on them and in New Zealand we've all heard the rumblings.
If interest only lending contracts it might cause 'mortgage stress' and consequently weak hands will become sellers. Property price growth is already decelerating going into winter, so if interest-only-lending contracts, prices could flat-line, even decline. Banks could increase rates to reflect risk [which is a risk in and of itself].
If the 1-2 year rates are anything to go by the banks are taking a wait-and-see approach, after all they believe they are largely in control of the property market - given they fund it. I suspect the banks will push/sell the 1-2 year rates to customers, believing that come time to refinance, rates will be substantially higher - which is currently not fully reflected in the 3-5 year rate offerings.
This has obviously all been said before and rates have gone down. I'm a renter but find it all very fascinating, sometimes frustrating. NZ property is the best novel out - diffidently a suspense filled thriller.
I have fixed for 1 year at 4.15%, on investment properties. Banks are tightening up on lending criteria.
My impression is major concern from big 4 regarding Auckland market. Apparently large lending on apartment buildings that need remediation and are essentially worthless. The foreign buyer ban, will hit high end and their halo suburbs in Auckland. There is a lot of you can't go wrong buying in blue chip Auckland suburbs talk, but 20% of buyers being offshore distorts market. They may be the marginal buyer, push up domestic bidders at auction, or overpay and create an unrealistic comparable.
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