Another major home loan lender has raised rates, this time ASB.
The increases are notable because they have removed the bank's very competitive 4.15% two year fixed rate from the market now, and settled in with other banks at 4.35% for this term.
The other ASB rate increases are relatively minor, but they do reinforce the shift higher in overall mortgage rates, across the term curve.
Cooperative Bank has also raised rates in the past few days.
ANZ and BNZ have already moved up. Kiwibank and Westpac are yet to, and their moves will probably come relatively quickly now given the two largest home loan lenders - ANZ and ASB - have already moved up.
It might be useful to assess how rates have changed over the past five years on this date. This table is for the popular two year rate at about February 18 each year
| about February 18 | 2018 | 2019 | 2020 | 2021 | 2022 |
| % | % | % | % | % | |
| OCR | 1.75 | 1.75 | 1.00 | 0.25 | 0.75 |
| 2yr swap rate | 2.17 | 1.91 | 1.12 | 0.38 | 2.57 |
| CPI | 1.10 | 1.48 | 2.53 | 1.52 | 5.95 |
| carded ... | |||||
| ANZ | 4.65 | 4.29 | 3.65 | 2.69 | 4.35 |
| ASB | 4.65 | 4.29 | 3.55 | 2.59 | 4.35 |
| BNZ | 4.65 | 4.29 | 3.55 | 2.59 | 4.35 |
| Kiwibank | 4.65 | 4.19 | 3.55 | 2.65 | 4.35 |
| Westpac | 4.65 | 4.29 | 3.55 | 2.69 | 4.35 |
The table reveals that fixed mortgage rates are not quite back to 2018 levels even though swap rates are well above those levels now. And it also reveals that the Official Cash Rate (OCR) still has 100 basis points to go to match 2018 levels. The two year rate was last at 4.35% in November 2018.
Perhaps we can posit that at a 2.57% swap rate, home loan rates have some significant upside. And that the Reserve Bank (RBNZ) may feel it needs to play catchup?
The view of Consumers Price Index inflation certainly shows that the RBNZ's OCR is way behind the eight-ball, reinforcing the upside view, because monetary policy is all about inflation containment now.
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 February 18, 2022 | % | % | % | % | % | % | % |
| ANZ | 4.10 | 3.85 | 4.25 | 4.35 | 4.75 | 5.65 | 5.85 |
 |
4.19 | 3.79 +0.14 |
4.25 +0.16 |
4.35 +0.20 |
4.89 +0.20 |
5.05 +0.10 |
5.25 +0.06 |
 |
4.09 | 3.85 | 4.19 | 4.35 | 4.65 | 4.89 | 4.99 |
 |
4.19 | 3.69 | 4.35 | 4.69 | 4.99 | 5.15 | |
 |
4.19 | 3.69 | 4.09 | 4.35 | 4.69 | 4.79 | 4.95 |
| Bank of China | 3.49 | 3.49 | 3.69 | 3.99 | 4.45 | 4.65 | 4.85 |
| China Construction Bank | 3.65 | 3.65 | 3.85 | 4.35 | 4.65 | 4.95 | 5.05 |
| Co-operative Bank [*=FHB] | 3.49 +0.10 |
3.39* +0.10 |
4.05 | 4.25 +0.10 |
4.59 +0.04 |
4.89 | 4.99 |
| Heartland Bank | 3.25 | 3.79 | 4.15 | ||||
| HSBC | 3.94 | 3.49 | 3.94 | 4.15 | 4.54 | 4.74 | 4.99 |
| ICBC | 3.65 | 3.49 | 3.85 | 4.05 | 4.55 | 4.75 | 4.95 |
 |
3.79 | 3.55 | 3.95 | 4.10 | 4.55 | 4.74 | 4.95 |
 |
3.60 | 3.60 | 3.90 | 3.99 | 4.35 | 4.74 | 4.90 |
Fixed mortgage rates
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52 Comments
The high level of the swap rate reinforces the notion that there are limits on the power of the RBNZ to influence medium and long term fixed rates using the OCR as its key tool . I recall a discussion along those lines some ten or so years ago, with the discussions led by a very senior Reserve Bank official, who I am not allowed to identify because the discussion was held under 'Chatham House rules'. The point he made was that if the OCR diverged too far from medium-term fixed rates then the RBNZ would be shown to be travelling naked. He said that once credibility to influence market rates was damaged then it would be hard to rebuild that credibility. So, I think he would now be saying that the RBNZ does indeed need to do some catchup.
KeithW
Very good post. The RBNZ are seriously behind the curve and they will have to act much more aggressively in raising the OCR if they do not want to completely lose what little influence/credibility on the markets they have been left with. Each step from now on should be at the very least a 50 bps raise.
Your suggestion would mean RBNZ gives in to the market and be lead by it.
That will only reinforce the market to go bolder and lead RBNZ by the nose in future whenever the market thinks the rate should be.
We may now be at a point in giving up independence and sovereign monetary policies to appease market participants and their opportunistic pressure.
When RBNZ loses it's ability to make independent decision, it is no longer for or by New Zealanders.
‘Your suggestion would mean RBNZ gives in to the market and be lead by it.’
Lol - yet that is exactly what central banks have done every time they fear a recession is about to hit (and to save those with too much debt to service!)
‘We think there might be deflation coming up so emergency rate cuts to zero’ but then also ‘we have real and measured high inflation but we are going to take a wait and watch view on it’
In reality (from my perspective) the rbnz only gives into the market if it thinks the debt ponzi might burst, and it did so to the extreme in 2020…which is the complete reverse view from your point above.
From the perspective of non asset owners the rbnz has already lost its independence and credibility as its actions only favour those who own assets (like yourself) - yet you can’t see that yet because it appears you’ve been deluded by your own greed and the central banks absurd willingness to do anything to keep debt speculators mouths (like yourself) above the water and breathing…while at the same time sinking the entire ship even further with those in the lower classes already dead in the water.
I would suggest big interest rates jumps would be the RBNZ finally doing its job for the first time in ages. It went to the property binge party and has been in a drunken bender ever since hoping it could go for ever. It cant. Debt grafting middlemen (dgm) leveraged up on peak housing have had it one way for so long they have no reference for what's about to unfold.
Reality should be OCRaround 7-8% and a DTI framework in place of 6x with a plan to go to 4x.
Look at a housing bubble model. Global banking is about to spring the "bull trap". Ponzi fans are still in the delusional phase.
Be quick...
At risk of moral hazard, the Government could engineer a soft landing for existing owner occupiers by underwriting current lending at much lower rates than the OCR. They could call it something like "State Advances Corporation" and lock it in at something like 3%. Could be a welcome apology to recent FHB for screwing the market for them.
Agreed. And they tried to expand their influence on market rates via QE and we are now suffering the inflation blowback.
The general consensus of markets for years now is that every bet is guaranteed as central banks will come to rescue with lower rates and QE to save the day. Bad economic news = share market goes up in anticipation of more central bank money
We seem to be approaching the limits of what central banks can do to control markets and keep propping up asset bubbles.
The RBNZ and government will not be able to control rates if they don’t keep rates pegged to other countries the NZD will tank even more pushing up inflation. So the dollar loses value or you raise rates which will damage housing market giving it a haircut like Yul Brenner, either way going to be painful especially for over leveraged.
David's table confirm what my boys had been telling me.
Historically speaking, changes in OCR has no impact on CPI except a minor readjustment in the same quarter. And that adjustment is so minute that from a casual perspective highly insignificant towards the downstream.
Therefore, I won't be surprised that changes to OCR does almost nothing to tamper current inflation and Robertson will have his day to tell the nation that truly the inflation is global and outside the capacity of this country to determine.
The best scenario now for RBNZ is that global inflation eases quickly to help keep up with the appearance that OCR is still having an impact on the current inflation.
Here is the RBNZ data on OCR impact on CPI.
https://www.interest.co.nz/bonds/101245/rbnz-modelling-finds-economys-r…
Could you please link your "boys" analysis.
However, traditional recursive methods for identifying monetary policy shocks in a VAR often produce counterintuitive results, where inflation appears to decrease in response to a decrease in interest rates, reflecting the endogeneity of monetary policy.
In order to overcome this problem, we estimate a VAR model and identify the monetary policy shock with sign restrictions. The reduced-form VAR with one lag is estimated using annual CPI inflation, quarterly GDP growth, the 90-day interest rate, and quarterly changes in the trade-weighted exchange rate. We then identify the monetary policy shock by restricting the model such that after an exogenous decrease in the interest rate,
- The impact on interest rates stays negative for up to 4 quarters
- The impact on CPI inflation is positive for up to 4 quarters
- The exchange rate depreciates in the same quarter.
While this methodology restricts the sign of the impulse responses, it allows the magnitude of the estimated impacts to vary freely.
This is crux of their problem, removing suspected endogeneity because it won't fit into their economic theory.
Inflation and deflation are real, removing ± on coefficients to fit an idea based on a theory does not change the fact that the real people on the ground experiences the real ± effects.
There you go, wrong research paper presented that disproved your point and reinforces ours.
Our analysis is not public domain- you're free to choose what you want to believe.
We always make good money when the crowd gets it wrong- be glad we're even highlighting it.
CWBW, you can't expect the OCR to have an effect on the CPI within a few months, it takes time for fixed mortgages to come to term before having to renew them at a significantly higher rate. Today's high inflation is still (partly) a result of ultra low interest ratesof 2020 & 2021. The almost 2% interest rate rises by retail banks in spring 2021 have not yet had an effect on todays CPI. The correlation is delayed by at least 6-9 months and onwards
Based on that logic there was no point in reducing OCR the last few years (and decades) if ‘your boys’ say that OCR has no impact on CPI - which non-asset owners have suffered through to prevent the world from entering deflation and a 1930’s style depression….but instead all that it has done is reduced mortgage lending rates and created a massive debt bubble.
Sounds like wise central bank policy.
’OCR movements have no meaningful impact on inflation and deflation, my boys research says so, yet it makes me rich whenever the OCR goes down because I speculate with debt and central banks always rescue me if deflation might show up using a tool that my boys have proven is completely impotent’
Anyone with a large mortgage should look at those numbers, then go hard and early on reigning in any discretionary spending and cashing up surplus toys while there is still a ready market for them.
If interest rates don't go up then no problem, but if they do then early action may just save you having to sell your house into a depressed market.
Yeah, I sorted myself out before covid hit. Would have been freaking out when covid arrived if I hadn't. However smugness soon turned to annoyance when I observed that I would have been much better off staying in a risky position. I wished the RBNZ had told me they would always look after owners of property.
So I am a bit biased. I was wrong last time and could well be wrong now but looking back from the future many may think that they should have got their house in order during these two years and not doubled down on risky purchases.
Depends on the type of "Saver". I'm in a different position to most people. The interest is just pocket money and I'm about to get a decent pay rise. Those at the opposite end of the spectrum trying to save the house deposit are the ones getting screwed. Not only house prices rising, their savings are getting taxed and so they are going backwards.
ASB's rise in home loan rates coming so close upon the heels of their recent statement that cos of CCCFA about 7% of mortgage applicants they "would have really liked to help" have had their loans declined!!! Sure reeks of charity. But,how does this interest rise help them? Or is it just a dig at CCCFA?
I'm going to continue my strategy of "always take the lowest rate" on offer. For the last 15 years, have saved many tens of thousands. It's hard to imagine the 1 year rate being significantly more than the 5 year rate in 5 years. And it would need to be significantly more than the 5 year rate to offset the cost of paying a higher rate for the first 2-3 years. In other words, if you think the 1 year rate is likely to be 7% or higher in 5 years time, then get the 5 year rate.. if not, stay with the lowest rate in the market.
I fixed for 3.05% for 5 years about 9 - 10 months ago with ANZ. Then traded up in December, which refinanced us at 4.95% for 5 years. Same bank etc. 40% equity.
Where are the 1 year rates currently sitting? When you factor in the usual (correct me if i'm wrong) 0.65% discount off the carded rate, the ANZ 1 year rate is currently 3.2%.
Thanks David for the chart.
So between 2021 and Now (In few months) Interest rate have gone e up by appox 62% and the process has just started. On $800000 mortgage for 30 years at 2.69% was appox $750 Pe week and now at 4.35% is appox $920.00 per week.
$750 in in itself was high and now is $920 which may be stressful for many and to top it up - it is not the end of interest rising - it is is just the beginning.
Home Loan rates are nearly as same as they were in 2018.
800k or a million will not buy much in Auckland when rates go to 6%-7% a lot of people will be stress. Once prices fall say 30% people lose heart start renting out rooms just to make ends meet and in the end a lot of them will start to default and market will keep spiralling down.Not a upbeat post but the way it is.
Exactly. The ponzi plunge protection rates we have all enjoyed are almost logarithmic in their increases from low levels. Who remembers 8-10% in the GFC. People should have used it to clear their debt, not tripple down on debt. Oh well.
No wonder crypto is doing well. It's avoidance of the the bankings shameless self interest.
Ill tell you what will happen.
Those that have already owned property for 6 or 8 years.. 10 years or longer on a prior 30 year that has been eaten down to say 20 years
will refinance from say the 20 years back to a 30 years mortgage , affordability easier.
Then house market stability.
I did it and now my payments are under $200 a week i am 42
My one flatmate covers all costs.
I installed solar panels.. so power bills are less than $100
I Pay nothing and inflation over time reduces my debt with no input from myself, is it fair , no.
Purchased my house in 2010 as a mortgagee sale in Tauranga for $160,000 now worth over $680,000
The young should be protesting on the streets
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