State-owned bank, Kiwibank, has announced a 2.99% one-year fixed home loan "special."
This new rate will be available from Monday, May 11, 2020.
Update: On Friday morning ASB announced it too will offer 2.99% for a fixed two-year term. ASB has cut its two-year "special" by 40 basis points to 2.99%, and its 18-month "special" by 50 basis points to 3.25%. More details are inthe table below.
It is the first time Kiwibank has had a rate below 3%.
And it is important because Kiwibank is a major home loan lender, one that can effectively pressure the big four Aussie-owned banks.
Of course, it is not the first bank to go below this benchmark.
HSBC already offers rates as low as 2.95%. Heartland Bank offers a 2.89% rate. And China Construction Bank has the lowest of them all at 2.80%.
Kiwibank's move lower involves a -10 bps reduction. But it only puts them -6 bps lower than ANZ or ASB for one year, or -6 bps lower than BNZ's 18 month rate.
However, with them lower than 3%, it will put pressure on the other majors to match them, driving the effective rate lower.
All banks are reporting squeezed net interest margins (NIMs) and the Kiwibank move won't improve those - unless they continue to whittle away at term deposit rates and other savings rates. As we have noted elsewhere, that depressing of savings rates is an ongoing trend. Kiwibank might have ensured that it will continue longer and deeper. In fact, Kiwibank offers to savers are generally lower than the Aussie-owned banks.
We had expected, obviously wrongly, that the main banks would be reluctant to go below 3% for mortgage rates leaving the minnows this space for some time. But that expectation is now out the window.
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Kiwibank's 'specials' apply when you have more than 20% equity in your home. They can apply to first home buyers who can meet that standard.
Wholesale swap rates have fallen sharply in lockdown although the latest daily shifts have seen that retreat end and a kind of floor may have been found. See the charts here.
Here is the full snapshot of the advertised fixed-term rates on offer from the key retail banks.
| Fixed, below 80% LVR | 6 mths | 1 yr | 18 mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| as at May 11, 2020 | % | % | % | % | % | % | % |
| ANZ | 3.65 | 3.05 | 3.49 | 3.35 | 3.99 | 4.75 | 4.85 |
 |
3.89 | 3.05 | 3.25
 |
2.99
|
3.69 | 3.79 | 3.89 |
 |
4.79 | 3.09 | 3.05 | 3.35 | 3.69 | 3.79 | 3.89 |
 |
4.29 | 2.99
|
3.39 | 3.65 | 3.99 | 4.09 | |
 |
4.79 | 3.09 | 4.25 | 3.39 | 3.69 | 3.79 | 3.89 |
| Bank of China | 5.15 | 5.25 | 5.35 | 5.50 | 5.70 | 5.99 | |
| Co-operative Bank | 3.25 | 3.25 | 3.35 | 3.45 | 3.69 | 3.89 | 3.99 |
| China Construction Bank | 4.70 | 2.80 | 2.85 | 3.19 | 3.30 | 3.45 | |
| Heartland Bank | 2.89 | 2.97 | 3.39 | ||||
| ICBC | 4.29 | 3.18 | 3.18 | 3.18 | 3.20 | 3.99 | 3.99 |
| HSBC | 3.64 | 2.95 | 2.95 | 3.09 | 3.50 | 3.60 | 3.70 |
 |
4.29 | 3.39 | 3.69 | 3.55 | 3.89 | 4.19 | 4.29 |
 |
3.89 | 3.39 | 3.55 | 3.55 | 3.89 | 4.45 | 4.55 |
In addition to the above table, BNZ has a unique fixed seven year rate of 5.20%.
Fixed mortgage rates
Select chart tabs
73 Comments
Kiwibank can afford to take more risk because if they end up in over their heads taxpayers will bail them out. Already they have the lowest returns in the industry by most metrics: https://bankdashboard.rbnz.govt.nz/profitability
Somebody has been throwing a stat around here that 8% of mortgage owners hold 40% of our mortgage debt. So as a taxpayer, are you willing to use your hard earned income to bail out banks who have gambled on house prices rising with those 8%? Those 8% must own a lot of property.
I for one am not.
Yes. They will need lower rates to offset the destruction of collateral underpinning their next loan rollover negotiations!
"Would you like to top up that equity, Ben, or would you like us to give you a couple of months at 2.99% to give you time to sell your property?"
Banks won't force a sale if borrowers can make repayments which should be a lot easier as rates go under 3%. See ANZ boss discuss negative equity from 7:10:
https://www.tvnz.co.nz/shows/q-and-a/clips/anz-boss-gutted-at-governmen…
There's 'force' and then again there's 'force' !
Banks CAN do whatever they like to an indebted client. The client has no choice other than to move banks; and just try that with a property that is in negative equity or looks distressed in ANY way.
What a friendly bank says it will do on a 'promotional' TVNZ clip, and what it actually does can be two entirely different things.
One things for sure. Whatever the bank decides to do will be in THEIR interest, not the clients.
Hi Boatman,when it comes to price of Dairy products-truth is once Fonterra pays us for our milk (approx. 75 cents a litre on current payout) then transport it,manufacture it & get it into Supermarkets & charge a margin of around 15%,you have to ask what margins are the Foodstuffs & Progressive Enterprises corporates charging.Regards.
Fiat is problematic, I wouldn't disagree there, but it bought my house, pays my energy, taxes, food, school fees, and shirt on my back, so while it can still be used in that way, it's not worthless. No one is turning up at Pak n Save with wheelbarrows of fiat just yet.
That's not how QE works. Instead of having to show up to the supermarket with a barrel of cash, you need an eighteen-wheel truck chock a lock with notes to buy a house or shares. In that way we are all prevented from saving our capital into the future. We are slaves to keep consuming because that's all we can afford. Fiat is indeed a very very bad investment.
We should not be fooled into a false sense of the Banks being in any way altruistic .
They know , like many do , that negative interest rates are a very strong possibility before the end of 2020 and if they do go negative it would be good to have as many borrowers as possible locked in at 2,99% on fixed mortgages .
You have been warned !
Nzdan, i suggest you keep the whole lot at floating. Aust already has rates from ANZ fixed 1,2, or 3 years at 2.19%. Wont be long before we see it here. We are stuffed and i deflation regardless of all rosy pics treasury and rbnz are painting. Negative interest rates are defintely on the cards. Cannot see rate movements anything other than downwards
I take a slightly different view. If you are of the opinion that we are going to be in a declining interest rate market for the next 2 years atleast then consider fixing loans for no more than 1 year. 69 basis points is a big premium to pay. It is unlikely drops are going to be that large in the future to make up for the premium you would otherwise be paying. In other words your better to take the saving while it's on the table. Let us know what you choose to do @NZdan as it's always interesting to see different perspectives.
It amazes me that we don't see that lower interest rates are squeezing the disposable spending python at both ends.
Lower mortgage rate encourage those of limited means to plough all their disposable income into taking on housing debt - less money to spend on anything else, and,
Those relying on interest receivable from investments of many sorts ends up with - less money to spend on anything else.
How is this a winning strategy by our all knowing RBNZ? It's not like heads I win, tails you lose it's 'We all lose...".
And they wonder why "Inflation is falling! How can that be with all this 'stimulus' we've put into the economy?"
Because lending growth is just filling the gap left from $15 billion+ a year in corporate profits leaving the country. Existing lending grows by $4 - $5b per quarter according to C32 (which unfortunately goes back to as far as 2015). And we're so grateful for it.
It'd be like me telling my boss i'm so happy to still have a job, he can keep my salary as profits and i'll start paying myself with my credit card. The bank keeps increasing my limit, so it's okay!
Because we don't measure things properly, and we have too many at the top who have made all their wealth simply from being born at the right time to inherit a supply of affordable housing then use poor governance to change said housing from affordable to unaffordable. When Key gave up on sound economic policy and settled for house price rises and immigration pumping that probably signaled there was little hope of real economic policy coming till things fall over.
It wasn't until 2015 that National's net migration numbers undertook the peak under the previous Labour Govt. Shamefully it has continued to the present day, despite opposition sabre-rattling and race-baiting from the then-opposition NZ First and Labour parties, who got in and did precisely nothing about it.
I can imagine a situation in the next 6 months where we have 20-30% unemployment and A. Church telling us house prices are going up because lending rates are 2.5%.
Falling interest rates = higher house prices.
Not increased earnings and ability to service debt. Its completely bonkers. Share market the same.
Those like you who aren't overleveraged will be fine.
They'll be able to stare X% property price correction and just keep paying the weekly payments. Even if they decide to sell, as long as it's their equity they are sacrificing, they will be allowed to sell by their lender.
But many, aren't you. And they will have problems of many kinds.
As I wrote above:
"Banks CAN do whatever they like to an indebted client. The client has no choice other than to move banks; and just try that with a property that is in negative equity or looks distressed in ANY way.
What a friendly bank says it will do on a 'promotional' TVNZ clip, and what it actually does can be two entirely different things.
One things for sure. Whatever the bank decides to do will be in THEIR interest, not the clients."
My grandfther born 1911 in Halmstad Sweden,never left. Never owned a house,only had ownership of one car in his life. A saab sometime in the 60s. Allways talked about driving up through Norway. Point is he had F all in his life but he was happy. Worked as a plumber. His motto: Take it easy. Only words he new in english. Died 2002.
My old man was talking to a long haul truck driver who said after spending so much time with his kids during lock down, he's decided to give up his 70+ hour a week a job as soon as he can. He said he would rather a 9 to 5 where he can enjoy time with family rather than chase more money.
Changing value of money $$$$
https://www.linkedin.com/pulse/changing-value-money-ray-dalio
DO NOT BE FOOLED INTO THINKING THE BANKS ARE BEING NICE !
And beware of taking up offers that look to good to be true ............. they usually turn out to be just that .
Here's why :-
1) You can be almost certain they will not be giving new loans anytime soon , they are unable to accurately value properties and will be extremely cautious approving new loans. This will not be any help to FHB's who have not deposit or unsecure income
2) They know there is a very good chance the interest rates could go to zero or negative , so interest rates could go lower , and in fact the odds are that they will.
3) The Banks would love to lock you up for a year at 2.99% ( or more ) if rates go to lower or to zero .
If I was finding things difficult I would convert my mortgage to interest only , or take a payment holiday , and definitely NOT fix
I agree that if people are struggling having at least part of the mortgage as floating rate would help them to get through the tough times.
Fixed rates are still better than floating rates so splitting the mortgage for flexibility and making use of the low interest rates is advantageous. Although I would not recommend anyone to fix for more than a year right now. Interest rates have a significant chance of dropping further in the short term. In addition data out of the US shows about -4% inflation whereas treasuries only went marginally negative. If the Fed sends interest rates to extreme negatives it will put pressure on NZ to do the same. The time risk of 6 or 12 month fixing is relatively low if there are large interest rate drops.
Sourcing money to lend in banking circles must be getting cheaper. All in the name of keeping the lending music in the musical chair game from stopping to preserve bank profits. At least Kiwi bank is putting downward pressure to stop the Aussies using us as a cash cow. Just get on with the reset already.
Saving has never seemed more pointless. The RBNZ prints 0% money for the government and the commercial banks print 3% money for everyone else. And the goals is..?..Avoiding a deflationary recession.
Why not just give the money to people who want a house? 3% is not 0% but given a little time and optimism...we should get there soon. Who knows maybe -ve % rates are not such a pipe dream. They should underpin house prices...shouldn't they?
Maybe free money for the government to throw away, but for average people without any secure job and with higher risks of getting laid off, banks would be very reluctant, especially when we are expected to see the house price fall. Perhaps, people with two or more houses can enjoy lower mortgage rates making a long term investment.
People with two or more houses are the problem. They should not be beneficiaries when future taxpayers will have to pick up the tab.
Mortgage relief to Owner-occupiers and FHBs only; possibly investors if they are buying off a plan but subject investors to a ten year brightline.
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