HSBC trims its three year fixed home loan rate as it raises term deposit rates. This new 3yr rate gives it a substantial advantage over all the main banks

We haven't yet seen other main banks respond to the longer term rate hikes recently announced by both ASB and Westpac.

But today (Wednesday), HSBC did.

HSBC has trimmed its fixed three year rate to 2.99%, a reduction of -6 basis points.

And that takes it down to match the offers from SBS Bank and the Bank of China. Only Heartland Bank's online offer is lower.

With today's reduction, HSBC adds to its market-low offers for four and five years fixed as well.

HSBC's new three year rate is now -26 bps lower than the BNZ three year offer, which is the lowest of any of the main banks.

At the same time, HSBC has raised most of its term deposit rate offers.

As you can see from the swap rate chart below, a cut in retail rates goes against the trend of rising wholesale money costs. Banks will be under some pressure to raise rates from here, not cut them.

And in turn, that is because there is growing conviction among banks that the RBNZ will soon raise its OCR, despite the ongoing lockdowns. The RBNZ is on a mission to 'normalise' and a short, pesky lockdown doesn't seem to be changing consumer expectations or buying habits in any permanent way. And inflation expectations are drifting well away from the 'transitory' hue some policy makers were assuming. So the RBNZ is increasingly on its guard against embedded inflation (the primary mandate focus) and will no doubt feel more comfortable about moving rates up while at the same time our labour market appears to be holding its healthy shape (the other mandate focus).

Bottom line? The money markets expect the RBNZ will raise rates soon. And the international backdrop is for higher longer term rates as well.

One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculators. (Term deposit rates can be assessed using this calculator). (Our calculators are temporarily down, but will be back soon.)

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. 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 September 8, 2021	%	%	%	%	%	%	%
ANZ	3.39	2.55	2.79	2.95	3.25	4.29	4.59
	3.29	2.55	2.79	2.95	3.55	3.99	4.29
	3.29	2.55	2.79	2.95	3.25	3.69	3.99
	3.55	2.49		2.79	3.29	3.59	3.89
	3.29	2.55	2.85	2.95	3.49	3.99	4.29
Bank of China	3.45	2.39	2.59	2.79	2.99	3.39	3.69
China Construction Bank	2.65	2.65	2.65	2.85	3.25	3.55	3.99
Co-operative Bank (*FHB only)	2.49	2.29*	2.69	2.89	3.19	3.49	3.79
Heartland Bank		2.15		2.45	2.65
HSBC	2.89	2.40	2.65	2.79	2.99 -0.06	3.39	3.69
ICBC	2.85	2.35	2.65	2.75	3.05	3.45	3.75
(*FHB only)	2.79	1.99*	2.59	2.79	2.99	3.39	3.69
[incl Price Match Promise]	2.89	2.55	2.74	2.89	3.15	3.49	3.79