Over the past three weeks, mortgage interest rates have been generally stable. The main activity has been the bedding-in of the prior floating rate increased from the last RBNZ OCR hike, along with some smallish adjustments by challenger banks.
But in the background, wholesale swap rates have been very volatile.
The last significant change by a major bank in home loan rates was a small trim by ASB on July 8. Since then, swap rates rose more than +30 bps in the next two weeks, and then have fallen more than -30 bps over the past week or so for a one year term, and -40 bps for a two year term..
Banks generally watched the rise without responding, but the fall has motivated Kiwibank to come back to market with a rate cut.
Kiwibank has cut its one year rate by -24 bps to 4.95%, and cut its two year fixed rate by the same amount to 5.45%.
Their new one year fixed rate is -30 to -40 bps lower than all its main rivals, and only a mere +5 bps above market-leader for rates in Heartland Bank.
Their new two year fixed rate however only matches their rivals (even though the net fall in wholesale rates is more significant for two years).
Kiwibank didn't change its term deposit rates at the same time, which leaves its one year 4% offer in place.
If other banks follow Kiwibank's one year rate move, they will be seeing margin compression for all business they write for a one year fixed rate. But already five other challenger banks offer sub-5% one year rates.
Meanwhile, borrowers seem to be more motivated by protecting themselves from the upside of potential home loan rates, rather than getting the last drop of savings by going short. Fixed terms of one and two years are shifting out longer, with three and even five year commitments becoming more popular.
The next OCR rate change is due on Wednesday, August 17, when a full Monetary Policy Statement will be issued along with intensive commentary, so we will get to find out the central bank's current thinking about these settings.
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 although break fees should be minimal in a rising market, they will start to bite in a falling 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 August 1, 2022 | % | % | % | % | % | % | % |
| ANZ | 5.35 | 5.35 | 5.65 | 5.45 | 5.99 | 6.85 | 6.95 |
 |
5.35 | 5.25 | 5.65 | 5.45 | 5.99 | 6.85 | 6.95 |
 |
4.99 | 5.35 | 5.59 | 5.39 | 5.99 | 6.09 | 6.19 |
 |
5.45 | 4.95 -0.24 |
5.45 -0.24 |
5.89 | 6.05 | 6.29 | |
 |
5.35 | 5.35 | 5.59 | 5.45 | 5.99 | 6.29 | 6.39 |
| Bank of China | 4.99 | 5.29 | 5.29 | 5.69 | 5.89 | 5.99 | |
| China Construction Bank | 5.35 | 5.35 | 5.65 | 5.45 | 5.99 | 6.85 | 6.85 |
| Co-operative Bank [*FHB special] | 5.09 | 4.99* | 5.39 | 5.39 | 5.89 | 6.05 | 6.19 |
| Heartland Bank | 4.90 | 5.29 | 5.39 | ||||
| HSBC | 5.29 | 5.09 | 5.29 | 5.34 | 5.59 | 6.29 | 6.39 |
| ICBC | 4.99 | 4.99 | 5.39 | 5.15 | 5.89 | 6.09 | 6.19 |
 |
4.95 | 5.15 | 5.35 | 5.39 | 5.49 | 6.09 | 6.25 |
 |
4.89 | 4.99 | 5.25 | 5.29 | 5.65 | 5.89 | 5.99 |
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32 Comments
NZ-owned banks have been putting up quite a challenge offering some of the lowest mortgage rates for the better part of a year. However, as of RBNZ's May-22 report, the 5 together account for only 9% of NZ's bank lending by asset value.
How much of this disbalanced situation contributes to our massive current account gap? Couldn't the government reduce some of that by simply injecting fresh capital into Kiwibank and give the Aussie banks a run for their money, by at least reducing their excessive margins if not cutting deep into their market share?
I just don't see wider deflation happening.
Even 30% off the current house prices only puts them back at 2017 prices.
Rates aren't going down ever, neither is insurance. Food is likely to continue along at higher levels for a while. So apart from a few consumer goods, where is the deflation coming from?
If oil prices fell significantly that would have direct and indirect effects (including on food). I am not predicting this, but it's certainly possible. Other commodities could act similarly (and already are to some extent)
Shipping could fall significantly as pressure releases, building costs could lose some of the recent froth.
I doubt we'll get to outright deflation any time soon but I do expect inflation to fall.
Correct. The real numbers we should be worried about are LCI and the gap between LCI and CPI. Next release on Wednesday 3 August.
If the gap is narrow and closing - worry for RBNZ and overleveraged households because inflation is getting entrenched with wage increases.
If the gap is widening - bad news for low-income households who will have more financial pain coming unfortunately.
Either way, our economy won't be coming back up on its two feet (housing and migration) for a while.
You reckon…..some of the uk papers have been reporting 10% price rises from some of the big corporates. These will flow through here. Also, I have noticed 15% increases in many supermarket products - budget brands. We have a long way to go yet so buckle up. In regards to IR, I think 7% in conservative. More people are hammered by inflation then will be hammered by interest rates. Not that I want to see it, but my bet is 35% drops in house prices.
not judging by the $854 quote to fix one hole in teh gib in a house in Taupo i got this morning ! half a sheet of GIB max --- its a work property -- but i am still going to actually drive down and do it myself at that price -- have a weekend away and still save money!
Spoke with a builder mate. No work booked more than 4 months out. He just canceled two much-needed vehicle upgrades and postponed hiring until next year. He said he should be able to find work around town, but isn't confident enough in the volume to take on any liabilities.
We talked about provisional tax as a big issue.
My mate got his employer accreditation from INZ weeks ago and is bringing in three tradies to help finish some jobs at hand. Multiply this over hundreds of employers and the situation we have is shrinking order books for subbies with imported wage competition.
Last year, I warned a few grads from going down the software testing career path for the same reason. You have the likes of Spark, TCS and Datacom bringing all their IT backend workers from abroad to work at the least-possible wages to qualify for work visas. Most leave upon gaining PR and then the next lot are brought in from overseas to follow the same process.
As a Lead Dev, Test managers are not the same as testers. High Schoolers could be testers realistically, it is not a complex job to test software functionality and tick a box in an excel spreadsheet. But Test Managers ensuring the tests match the business analysis and the code performs the described behaviour properly is a bit more complex.
It is more the mundane nature of the work. It is bloody boring work and you have none of the power that devs have to shit on clients and either sell them on things or blow out their candles on stupid features that make no sense.
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