ANZ is making sharp increases to fixed-term home loan carded mortgage rates across the board.
The bank is pushing through a +45 basis points increase, far above the recent +25 bps Official Cash Rate increase from the Reserve Bank.
ANZ no longer offers any mortgage rates below 3%.
And now ANZ's four and five year fixed rates are well above 5%.
These changes follow sharp wholesale rate increases in the past few days, that are sticking after their initial jump.
Since the surprise CPI jump on Monday, wholesale swap rates have risen about +30 bps.
Since the October 6, 2021 RBNZ +25 bps OCR rise, wholesale swap rates have risen about +50 bps. So that means today's +45 bps rise by ANZ is a lesser increase than for wholesale money costs.
At the same time, ANZ is also sharply raising term deposit offer rates.
ANZ's move is likely to be followed by similar increases by all other retail banks. Wholesale money costs affect them all, but they especially affect the larger banks. The challenger banks get their signals from the competitive situation in the retail deposit markets. ANZ's increases there are more in the +30 bps range for terms under 1 year, so these challenger banks may have opportunities to expand their competitive difference.
One useful way to make sense of these changed home loan rates is to use our full-function mortgage calculator which is also below. (Term deposit rates can be assessed using this calculator).
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. But 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 October 21, 2021 | % | % | % | % | % | % | % |
| ANZ | 4.00 +0.45 |
3.24 +0.45 |
3.54 +0.45 |
3.70 +0.45 |
3.94 +0.45 |
5.04 +0.45 |
5.34 +0.45 |
 |
3.55 | 2.99 | 3.29 | 3.45 | 3.69 | 3.99 | 4.29 |
 |
3.55 | 2.99 | 3.29 | 3.45 | 3.69 | 3.99 | 3.99 |
 |
3.55 | 2.95 | 3.30 | 3.65 | 3.89 | 4.19 | |
 |
3.55 | 2.99 | 3.25 | 3.45 | 3.69 | 3.99 | 4.29 |
| Bank of China | 3.45 | 2.69 | 2.89 | 3.09 | 3.39 | 3.65 | 3.95 |
| China Construction Bank | 2.99 | 2.99 | 3.29 | 3.69 | 3.99 | 4.29 | 4.39 |
| Co-operative Bank (*FHB only) | 2.99 | 2.79* | 3.29 | 3.60 | 3.89 | 4.14 | 4.29 |
| Heartland Bank | 2.35 | 2.60 | 2.90 | ||||
| HSBC | 2.89 | 2.69 | 2.89 | 3.09 | 3.29 | 3.59 | 3.84 |
| ICBC | 2.85 | 2.45 | 2.65 | 2.85 | 3.15 | 3.65 | 3.95 |
 |
2.89 | 2.75 | 2.99 | 3.15 | 3.45 | 3.95 | 3.95 |
 |
2.89 | 2.74 | 3.04 | 3.20 | 3.44 | 3.94 | 3.94 |
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118 Comments
....and its the peak of the market too - Rates bottomed out at 2.29% in Oct 2020 and 70% loans written since then have been 12 month fixed loans- every loan that rolls from Nov will be have a full 1% increase on their rate. Thats $53 extra required per month for every 100K borrowed.
$500K = $265 per month
$700K = $371 per month
$1M = $530 per month
When you consider some 40% of loans are taken out on interest only terms, price increases as a proportion of total payments is massive.
"but banks stress test at x% " .... sure, but what is the quality of that stress testing and the methods used for calculating expenses? Just look at what the Royal Commission found in Australia when they looked at how banks were calculating expenses. Did the RBNZ bother to do a similar investigation, despite these being the same companies ... of course not.
Finally - after many years - a bit of positive news for people with bank term deposits. In particular, many senior citizens will be relieved.
There's justification for interest rates to rise - but the increases won't be overwhelming......
Nonetheless, there'll always be those who have over-committed themselves and, in response to market discipline, will hit the wall at speed. Thus, for others there'll be a silver-lining.
TTP
How many of those senior citizens got sick of the low TD rates and invested in investment properties?
The bigger the debt linked to housing the bigger the magnitude of hurt from rate rises. Rate increases don't have to be overwhelming to cause carnage with so much housing debt.
NZ lets face it, for over a decade now we've been on an unsustainable path blowing up an asset bubble and at some point in time we're going to have to suffer the consequences. Who knows when that will be but some people are starting to think the time is closer than first thought.
A few smug under 40s think they”ll be fine and can handle it. There’s a big difference between theoretical economic pain and realised pain. Not many know what it’s like - as you have to go back to the early 90s to see widespread economic hurt in this country.. as they say “a recession is when my neighbour loses his job - a depression is when I lose mine”
Unless you live through the 1930's-1940's as young adult, and are still alive today, then you likely have no idea what real sacrifice and economic pain is.
Boomers certainly don't as everything has been done since they were born to ensure they had smooth sailing throughout their lives.
Millennials are the equivalent of the GI's of the 1930's-1940's who will live through this current madness and remember it for the rest of their adult lives and do their best to ensure that it doesn't happen again on their watch.
Boomers won't change anything as they think the world revolves around then, yet they wonder why everything is falling apart around them when they are unwilling to make any sacrifices. Not their fault though as they were conditioned to believe the world worked in one way, not realising it was what their parents did for them that made their lives work out relatively well. Now their parents are almost all dead, they are lost and confused and don't know what to do.
Dgm.
Not helpful.
Kiwis don't default.
They hang on, hunker down and ride it out.
There are very, very few mortgagee sales and mainly only pacific islanders bankrupted through sickness, job loss and sending money to family in the islands for funerals.
I know because I worked in insolvency negotiating between debtors and creditors.
So no, there will not be mass defaults.
It might be 'different' this time if the option of dropping rates doesn't eventuate. Not saying that is what will happen, but just saying that in past recessions, the RBNZ has had the luxury of dropping rates to help save those at risk of default. But the size of the debt now and the ability to drop rates significantly has been nearly completely eroded - this could see very different outcomes in the next recession that what you have experienced in the past.
Yeah, I've mentioned on this website before. The reason New Zealand were doing better than other countries during last GFC was OCR back then pretty high, so RBNZ was able to slash it to help economy to recover. Now with our historical low OCR, when the next crisis hit (could be this one), we are not able to do the same. I think people intend to forget what a recessions is really about, some people are even looking forward to a recession so they can just enjoy low interest rate to inflate their assets price. And these people seems to get the orders wrong, low interest rate comes after recession. In a severe recession scenario, most people lose their jobs, housing market crashes, businesses and banks go bankrupts, investors are scared to invest. It's lose lose situation for everyone.
Its not garbage but they need to be more specific, 6% on what ? The ANZ 5 year rate is practically already there. One more OCR rise and you have your 6%. I will only take the OCR to get back to 2% and you will pretty much have 6% across the board on even 3 years fixed rates, hardly an impossible scenario the way things are trending.
I wanted to move to Heartland from BNZ but Heartland are so so so slow in processing your application, don’t give any cash contribution and you have to pay lawyers etc, have to move all your main accounts to them, it was so drawn out and there were 2 rate increases from the beginning of my application that I just fixed with BNZ. To top it all, there is no phone number to call to ask for an update. Must say though their email responses are not bad, they reply back same day.
Stuff have already written articles about the poor home owners taking the hit. It's the comments that get me though.
The "it's just supply and demand, interest rates have nothing to do with house price rises" brigade are suddenly worried about interest rates, funnily enough.
... for generations borrowers have complained that their bank manager is " a prick " .... and , looking around at the wide world of investment bubbles , from house prices / sharemarkets / oil & gas / rare art / craptocurrencies such as Buttcoin ... one has to wonder .... which bubble will be pricked first by soaring interest rates ....
I'm in the middle of the millennial age bracket and most I know bought too long ago to be worried about rising rates. The houses we bought only a few years ago are worth at least 50% more, which doesn't help us but surely screws the younger millennials and zoomers.
The younger millennials will be heading to Australia soon enough. Stay in NZ with crappy overpriced housing and low wages? Yeah nah...
But the government won't care because they can replace them with immigrants with lower expectations of wages and living conditions. It's just globalisation where the labour comes here instead of staying in China etc, both pushing up rental demand and house prices while squeezing young Kiwis out.
But they stress test the loans to 6% so everyone should be fine?
Does anyone know what formula they use to work out how someone can be OK going from say 2.99% to 6%?
Does it involve cashing in your KiwiSaver, taking second jobs, selling other listed assets, forgoing health insurance, mince every night for dinner etc?
I think what they mean by OK is from the bank's point of view, not their clients.
Yes, another question that I would like answered is, do banks take out an insurance policy ie can get paid out from, against a customer's loan that goes into default?
The reason I ask is I know of a case where a solo mother with a child that had a medical misdiagnosis and resulting in huge financial costs, and this lead to events with the mother not being able to keep up mortgage repayments. The bank sold her house at a mortgagee auction and bankrupted her on the outstanding $20,000 even though there was more than enough supporting evidence to show there was no benefit to anyone involved to bankrupt her due to being penniless with a child left with a disability.
The only reason I can think a bank would do this (besides being morally bereft) is that to claim on any insurance they would be required by the insurance company to take all possible legal channels available to seek repayment before they could claim against the loss, including bankruptcy.
Mince is up to $20 a kilo if not on special. Think re-hydrated navy beans not mince.
A few more articles like this in the future if things go more pear shaped:
https://fcaa.org/2018/03/14/how-to-feed-a-family-of-4-on-50-a-week/
They could try living on Gummy Bears https://www.u-buy.co.nz/brand/giant-gummy-bears while singing this song https://www.youtube.com/watch?v=astISOttCQ0
"It's all fun and games until someone loses an eye"
Both banks and their customer have been looking the other way when it comes to mortgage applications. What did I read last week? +40% of Aussie loan applications have been 'embellished". And the banks know it. So you're right. It isn't the borrowers that are protected by any form of buffer calculation.
(PS: If this does causes some sort of property market recalibration, then All Political Parties/RBNZ had better not squander the opportunity to, finally, do what has to be done - and hold onto the 'gains')
Yes, the Aussies have been caught doing it time and again, because their regulators go looking for it.
Most of our banks are Aussie banks, and in lieu of no regulators caring to look, I think it is a fair assumption to think that there is some embellishment going on, or at least their definition of the stress test is one that always sees them being OK. Unfortunately, the customer thinks they are included in this.
Yes.
But again, if banks have genuinely stress tested at 6% at pre-approval stage, then surely a rate of say 5% rather than 3.5% won't be a killer for the deal? (Although it could make some household budgets extremely tight).
Might this potentially affect investors more than FHBs?
Banks are full of pretty clever people who know what to do.
They cant do anything about already issued loans - they will just hope those people have a pay rise that will counter the lift in rates, but they will apply new levels for new loans ie if in June they were using 6% as the loan level its likely they will now be using 6.5% or 7%.
Banks whilst they will do it - prefer not to mortgage sale properties - so they try to make sure there is always enough buffer.
What it does mean is borrowers in the future may find what they are pre-approved for today will be less when/if their pre-approval is renewed - assuming no increases in income.
Literally the announcement of a downturn. People are about to find out what happens to a risk on country when too much risk is taken on. Rbnz may realise that 33% house price increases do not represent financial stability. Textbooks will be written on these errors. Even lowering the OCR will not help as the inflation train has left the station and people are dumping dollars in the knowledge they are worthless tomorrow, whereas physical goods will only go up in price. Did the 6% test rate include petrol costs at these levels or food costs or rates the council are charging? No.
Can't say for sure, but it does feel a bit like Bascand is leaving RBNZ knowing the carnage that is coming.
Slow motion train crash.
It's astounding how oblivious most people are, including most people I know in the development sector. Is it wishful thinking or just stupid ignorance?
Not sure how you could get burned in 2008. I bought a house in 2005 and sailed through the GFC like it never happened. House prices just remained flat for years and my RV only went down $10K after the supercity merge. Sure house prices never did that much after that for a decade but ever since that they have gone nuts and more than made up for it. We don't yet know what a severe economic event is in this country.
I am talking about the development sector and employment, not house prices.
You may remember NZ had the one-two punch of mezzanine finance collapsing and then the GFC...
And you may recall we had the luxury of cutting the OCR deeply then, which we don't have now...
If you keep your job in a recession, you do well. The mortgage is cheaper, and there are sales all over the place.
Some are laid off, and many households rely on overtime or more than one income.
The other key factor, is that the self-employed are still employed but their incomes take a massive haircut.
What happens when interest rates rise across the board? People stop discretionary purchases - (that Audi!).
That.....will be Deflationary.
What New Zealand needs now is not higher interest rates, but control of the ONE aspect of the economy that is dependent upon lower rates and unbridled issuance of debt.
If the recent ,small Bi-Partsan cooperation on housing can be made into a beast with more teeth, then controlling debt into housing and allowing rates to stabilise or fall might be the best future our politicians can give us.
People and lenders can handle a notional fall of 50% in their net worth - it's just a number after all - IF the indebted can still service their existing commitments; which isn't 'just a number' - it's real cashflow.
Do our current politicians and bureaucratic mandarins have the foresight and courage to do what has to be done? We are about to find out.
Deflationary to an extent, but what about oil costs and the supply strains now that just in time manufacturing has been killed? What about the green revolution and the move away from products manufacured in China? What about the worthless fiat currencies? What about the increases in rents, council rates, food? Deflation yes, but only after a HUGE inflation spike - a tidal wave over an island that someone once called Fiji on steroids...
I like Subarus as well. Have owned a few and they've always done me proud.
I tried to place an order on the last of the current gen WRX STI, but got told I'd have to wait nearly 10 months for the car to arrive from Japan so I passed on that. I'm without a car at the moment, and riding my eBike everywhere is getting tiring!
I wonder if we will see some weakening in the car market if interest rates increase and households tighten the belt. Presumably large amounts of car purchases are financed through the mortgage (or just the "wealth effect" and then feel confident enough to go and borrow on dealer finance).
The salesman at Subaru looked at me like I was from outer space when I said I wanted to pay cash - not because you get a discount, but purely because I don't like owing money on anything apart from my house, and even then that scares me.
Those who have been reading Interest for a while know that I have been debating against house price drops over many years, I have been called a spruiker and worse. I do absolutely believe now, that house prices rises will come to an abrupt end in 2022 and that they will quite possibly fall
It all depends on rates, right? Which in turn depends on how long this wave of inflation lasts. A lot credible people claim it's just supply chain disruption; but it seems like too much of a coincidence to me that it has hit us just at the point when even the most hawkish of economists and policymakers have rolled over and conceded that Inflation Is Dead And Isn't Coming Back. Some kind of cycle there...
Yes it depends on how long higher inflation will last indeed. It's becoming clear that it's not as transitory as some thought. On the other hand I don't believe that inflation is about to return to its "long term average" because the current inflation isa result of 1) supply issues as you said and 2) monetary and fiscal stimulus, but current high inflation is NOT a result of amazing GDP growth. I believe that . as governments and central banks remove their stimuli, inflation will evaporate quite quickly, this will then lead on to lower interest rates again.
Since the GFC we have not fixed the economy at all, we have just made it "look good" with government and central bank interventions
Most of those leveraged up have never seen, nor did the seminars ever present, that rates can go back long term normal. The current environment has been the most artificial in a generation, and not sustainable. As rates go up, yields go down. As yields go down so do values, especially in commercial property. Many will soon be topping up their speuvestments, with no tax rinse or foreign capital parachute.
Suddenly they realise they are the naked emperor.
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