Home loan rate rises now coming thick and fast

Personal Finance / analysis

BNZ raises most of its fixed home loan rates, but rather surprisingly trims its 2-year offer to match Kiwibank and Westpac. It also raised TD rates. HSBC also raised all its fixed mortgage rates

14th Jun 22, 9:15am by David Chaston

Source: 123rf.com Copyright: artqu

We start Tuesday with home loan rate rises (mostly), from BNZ and HSBC.

But given the remarkable rises in international benchmark bond yields overnight, our local swap markets are very likely to race higher again today, adding strong upward pressure to the cost of money.

So the changes announced here may only be quite temporary.

However, in an unexpected move, BNZ actually dropped its key two year fixed mortgage rate, trimming it by -6 basis points to 5.19%.

At that level it matches Kiwibank and Westpac, and these three now have a 16 bps advantage over ANZ and ASB for this 2-year fixed term. This is unusual, given the rising wholesale rate background. You might have expected it would be Kiwibank and Westpac who were to raise theirs.

BNZ has raised most other rates from six months to four years, and by between +10 bps and +30 bps.

BNZ also raised term deposit rates for terms of one year and less, by between +5 bps and +25 bps. Their six month TD rate is up +20 bps to 2.50% and their one year TD is up +15 bps to 3.15%. Neither offer is remarkable in the current competitive environment, just catching up to their main rivals.

Also announcing mortgage rate changes today is HSBC. They raised every one of their fixed rates by between +15 bps and +30 bps. But HSBC didn't match these with higher TD offers.

Heartland Bank and TSB are the only banks offering two year fixed home loans at under 5% now. All rates under 4% have now vanished, soon to be a distant, if fond memory, and those still with them on fixed terms yet to expire had better prepare for sticker-shock.

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 June 14, 2022	%	%	%	%	%	%	%

ANZ	4.95	4.85	5.15	5.35	5.65	6.35	6.45
	4.95	4.85	5.09	5.35	5.65	6.35	6.45
	4.69 +0.30	4.85 +0.30	5.09 +0.19	5.19 -0.06	5.65 +0.20	5.89 +0.10	5.99
	5.10	4.85		5.19	5.39	5.55	5.79
	4.85	4.85	5.09	5.19	5.49	5.79	5.89

Bank of China		4.45	4.80	5.10	5.40	5.70	5.90
China Construction Bank	4.35	4.45	4.85	5.19	5.45	6.15	6.35
Co-operative Bank	4.49	4.49	4.85	5.19	5.45	5.75	5.95
Heartland Bank		4.18		4.84	4.95
HSBC	4.79 +0.30	4.69 +0.30	5.04 +0.15	5.29 +0.14	5.54 +0.15	5.94 +0.25	6.04 +0.15
ICBC	4.39	4.39	4.85	5.09	5.45	5.69	5.89
	4.65	4.55	4.89	5.19	5.39	5.79	5.95
	4.45	4.34	4.90	4.99	5.35	5.55	5.75

Fixed mortgage rates

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Source: interest.co.nz

Source:

Daily swap rates

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Source: NZFMA

Comprehensive Mortgage Calculator

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13 Comments

by malamah | 14th Jun 22, 9:42am 1655156564

Interested to know what peoples predictions are for 2023. Not in terms of rate values, but rather the true impact of the increasing rates. There's a lot of bad debt out there, does anybody believe that poses any risk to the major banks? They seem to be fairly safe with record profits recently but it's difficult to tell. Then off the back of that, would bank bail outs stimulate the economy and pose a big risk in an economy under stagflation?

Genuinely interested, I watched Princes of the Yen after it was recommended on here a few days ago. In the wake of the 90s bubble in Japan, the IMF restricted bail outs of foreclosures which would have stimulated the economy and helped bring the country out of recession earlier. However, during stagflation where the central bank would still be looking to keep the economy tight, this would be difficult to do. And again during the GFC, banks were bailed out and a massive stimulus was pumped into the economy to get the major economies out of recession. Not sure we'd get the same level of stimulus in the US while inflation is running hot.

by Eschaton | 14th Jun 22, 9:52am 1655157170

Difficult to predict the future but it's not looking particularly bright for the low/middle/average wage earner. Immigration/emmigration will be a key factor alongside energy prices and other external factors. Best case scenario would be some kind of miraculous technology breakthrough that benefits everyone within the next couple of years but we're just as likely to see natural disaster(s) mess things up.

by Yvil | 14th Jun 22, 10:33am 1655159588

I think retail banks will be fine, but I can't see NZ avoiding a recession, I've said that for a long time. I still predict a recession in early 2023, rising unemployment, and a return to easing monetary conditions by the Reserve Bank(s) in the 2nd half of 2023.

Happy to admit I was wrong by end of 2023, if this doesn't eventuate.

by malamah | 14th Jun 22, 11:16am 1655162185

Yea I agree - it's hard to see how NZ could possibly avoid recession. Stranger things have happened, but 2023 recession is my general prediction as well. Could come sooner.

by MidNZ | 14th Jun 22, 10:49am 1655160589

I think the rates will continue to go up as that seems to be the only way to protect the value of the NZD to fight off even higher imported inflation.

Despite this I think inflation will stay an issue until mid 23 at least. Might even lead to some kind of regulated price ceiling for food produced in NZ. For example in a declared climate emergency how is it that it is cheaper for dairy/meat to be imported to NZ, when we export so much of it? At some point this has to gain some interest...

Bonus prediction is that National will campaign on adjusting tax rates (business and income) whereas Labour will look to bring in a "temporary but recurring" cost of living payment. Minor parties will start discussing UBI and gain some traction, but not enough to implement anything

by malamah | 14th Jun 22, 11:09am 1655161784

I do wonder about a UBI. For years I've been pro UBI without really thinking too much about the economic implications of it. I don't think it will happen in NZ though. In the context of major economic events, it removes _some_ control from the central banks. That is, a portion of the economy is cyclic and a portion can be controlled and/or influenced by the central bank. For example if we had a UBI now and were dealing with high inflation by tightening the economy, the true costs would not be shared across the population, but rather the impact would only exist on money not tied up in UBI. Instead of less money for everyone, it would be (more) less money for those who earn a fair amount on top of the UBI. The impact would be greater and the unemployment rate might rise at a greater rate. As the cost of living goes up, calls for an increase in the UBI would be loud and the result would be exponential tightening of the economy from both sides. Central bank tightening and more money tied up in UBI.

Could argue similar is happening now wrt emergency housing, cost of living payments, half price transport (kind of), welfare etc. However the impact of inflation and monetary tightening seems to be more broadly shared in the population than if there was a UBI and unemployment was higher as a result.

There are positives for UBI, I'm just specifically thinking about the current economic outlook. Happy to be proved wrong if I'm talking rubbish

by MidNZ | 14th Jun 22, 11:23am 1655162621

I also don't think that UBI will happen here in the short term but I do think there is enough interest and frustration in the current model that it would be a vote winner for some.

In principle the thing I like about UBI is that it brings everything out into the open and simplifies things. No more having to calculate WFF, NZ Super, Accommodation Supplements etc these can all be scrapped and ditch the government infrastructure needed to administer this.

Because of the opacity of the current system I don't know if UBI would have much of an effect on the ability of central bank to control inflation. Could it actually take pressure off minimum wage increases? (Happy to admit I'm getting out of my depth now ha ha)

by malamah | 14th Jun 22, 11:54am 1655164466

Yea definitely getting out of my depth now. Interesting thought though! I guess the reality is that nobody really has all the answers. Even at the top it's paid educated best guesses in a lot of ways.

The admin of UBI, or rather lack there-of, is a fairly significant drawing power. However if you think of it as eg an Accommodation Supplement budget, a portion of that is attributed to those in rentals, and a portion attributed to incomes of administrators. It would be good to know statistics on the true cost of every dollar paid in welfare. I must be in the budget somewhere I've never cared to look. Maybe it's similar to the cost of living payment; IRD will do it! Doesn't cost a thing! haha classic.

by taimaiakka0 | 14th Jun 22, 11:52am 1655164321

After DENIAL...Now can see asking prices in Manukau between $950000 to 1.1 Million which would last year be priced between 1.2 Million to 1.4 Million.

Now this price (Fall of 10% to 20% from peak) may stabilize for a while as many FHB who are still under FOMO and have loan approved will jump - before running the next leg towards bottom and another 10% to 15% Fall.

Still many vendors and re agents have asking that is reflection of peak (15% to 20% above current market) as a result in market for over three to four months and still not ready to accept the reality (May be are in no hurry to sell and can hold).

by malamah | 14th Jun 22, 11:57am 1655164654

I imagine if you went to almost any other country in the world and told the seller they could sell at a price that was 20-30% up on early 2020 prices, they would do whatever they could to make the sale. Might even sell lower if they were struggling for buyers. NZ housing market is very much in denial still. Interesting to watch.

by RickStrauss | 14th Jun 22, 1:45pm 1655171119

I've said it before, and it's absolutely true - despite the protestations of some on this site - that my relatives in LA and SF find the idea of paying $1.1 million for a pretty average 2 bedroom townhouse over 30km out from the CBD is absolutely nuts. Yet, Millwater...

by Carlos67 | 14th Jun 22, 2:43pm 1655174596

The problem with the USA is that it's the land of extremes and that's across the board with everything from their IQ to housing.

by RickStrauss | 14th Jun 22, 3:04pm 1655175892

No argument there. It's just often claimed that (potentially because the top end is so much higher) Auckland house prices aren't ridiculous when compared to SF and LA where everything is so much worse. Definitely decent suburbs in both SF and LA closer to town than 34km (Millwater) and better value than $1.1 million for a 2 bedroom townhouse.