Updated with more cuts by TSB, Westpac, and HSBC. The TSB cut to their one year rate now makes it the lowest of all banks for that term. TSB's 4 and 5 years rates are also the lowest of any bank now.
The combination of the flattening swaps curve with fast-falling longer rates, plus a move by more borrowers to be prepared to lock in longer rates, has brought more changes to carded fixed mortgage rate offers from two banking majors.
ASB has cut its three year fixed rate by -30 basis points to match the recent trim by market leader ANZ.
But it has also brought back proper four and five year 'special' rates, with cuts exceeding -100 bps.
In fact, it has priced its four year rate at 5.79% and its five year at the same level. That makes both market leading offers across all banks. Essentially, this reprises rate levels we last had at these fixed term in late March 2022.
At the same time, BNZ cut most of its fixed rates for terms on one to five years, skipping any change to their two year offer.
BNZ's reductions were sizeable too, and for four and five years would have been notable if ASB hadn't trumped them.
So BNZ will have to feature its one year 4.95% rate, dipping a chunky -40 bps to match the earlier level offered by Kiwibank for that term. It is certainly competitive at that level, well below its other Aussie bank rivals.
BNZ did not change any term deposit rates with these home loan rate cuts.
But ASB actually raised some short-term term deposit rates, although only really bringing them up to market levels.
It is an odd situation where we report falling borrowing rates and rising savings rates. It probably won't last, but it is hard to know which side will blink first. Bank treasurers will no doubt by squirming somewhat on the margin compression. But that is what you can get when volumes are low and everyone is desperate to hold their market share when there isn't enough to go around. Competition is getting brutal.
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 in two week 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 4, 2022 | % | % | % | % | % | % | % |
| ANZ | 5.15 | 4.99 | 5.29 | 5.45 | 5.69 | 6.85 | 6.95 |
 |
5.35 | 5.25 | 5.65 | 5.45 | 5.69 -0.30 |
5.79 -1.06 |
5.79 -1.16 |
 |
4.99 | 4.95 -0.40 |
5.49 -0.10 |
5.39 | 5.69 -0.30 |
5.89 -0.20 |
5.99 -0.20 |
 |
5.45 | 4.95 | 5.45 | 5.89 | 6.05 | 6.29 | |
 |
4.99 -0.36 |
4.95 -0.40 |
5.29 -0.30 |
5.45 | 5.69 -0.30 |
5.99 -0.30 |
6.09 -0.30 |
| 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 | 5.04 -0.25 |
4.89 -0.20 |
5.09 -0.20 |
5.14 -0.20 |
5.39 -0.20 |
6.09 -0.20 |
6.19 -0.20 |
| 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 | 4.85 -0.15 |
5.19 -0.06 |
5.29 | 5.59 -0.06 |
5.69 -0.20 |
5.69 -0.30 |
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46 Comments
They are dropping rates to prevent defaults by their customers. I suspect the banks are happy to have reduced profit margins for fewer defaults and mortgagee sales. The housing market is on the edge, banks are aware of their pricing power and have likely reached a schelling point of determination to prevent the crash hitting harder by tightening.
I think there is truth in how Banks are rate adjusting to suit circumstances and the potential future except unemployment is very low so stress testing at 6-7% on loan initiation should confirm ability to pay. If Banks are more forward looking and are discounting stats as they are lagging indicators then they may be following the Volker method and eventually see the 2-2.5% rate above CPI to control inflation - Ugh - see this -
https://www.chicagobooth.edu/review/what-makes-it-hard-control-inflation
It is an odd situation where we report falling borrowing rates and rising savings rates. It probably won't last, but it is hard to know which side will blink first. Bank treasurers will no doubt by squirming somewhat on the margin compression. But that is what you can get when volumes are low and everyone is desperate to hold their market share when there isn't enough to go around. Competition is getting brutal.
Very interesting, thanks!
I see different rates when i click on 'refix' in my westpac internet banking. A rare case of a business looking after it's existing customers? Normally i find you have to switch, or threaten to switch banks to get a discount on the carded rates, but i have 4 years to go on the main fixed portion, so in no position to switch.
6m 4.99
12m 4.99
18m 5.29
2yr 5.39
3yr 5.69
4yr 5.99
5yr 6.09
I think the swap market represents the interest rates at which banks lend to each other (interbank lending). It is called swaps because banks use this market to balance their finance maturity books (different banks may have different maturity structures, some may be short of some dates whilst long on other dates, which encourages swapping if they find a counterparty with an opposite finance structure).
In other words, the swap rates represent the interest rates at which banks lend to each other for different maturity dates. For example, we have been seeing the 5 year swap interest rates sharply decrease in the last few weeks. This means, banks were asking a higher interest rate for a five year maturity in interbank lending a few weeks ago than they are asking now.
This trend is encouraging, as it indicates that banks are expecting that the RBNZ will have to ease off their brutal OCR hikes. Any further OCR hikes would probably kill the NZ economy at this point, where lending/borrowing and investing has almost dried up.
I am keen to be corrected on this understanding as I would like to learn more.
"It is an odd situation where we report falling borrowing rates and rising savings rates".
This is all easily explained by sectoral balances as we also need to take into account the governments fiscal balance and our external trade balance expressed thus, (S-I)=(G-T)+(X-M). It is also called an accounting identity and was developed by economist Wynne Godley who worked for the British Treasury.
All financial flows between the sectors must net to zero. If one sector is a surplus then one or more of the others then must be a deficit.
This is core MMT but totally outside of the scope of mainstream economists and it is one of the many reasons why their predictions usually fail and why they can't explain much at all.
Definitions and graphic here https://en.wikipedia.org/wiki/Sectoral_balances#/media/File:Sectoral_ba…
Math is correct, facts are partial, I find it a dangerous simplification
I tend to agree, whilst I don't know much about Modern Monetary Theory. I think in simple terms: Money printing, or quantitative easing in posher terms), creates consumer price inflation. To prevent too much inflation via debasing the currency, the housing price index should form part of the consumer price index.
The money for housing is created by the banks, it's not government money. The vast majority of money that we spend has been created by the banks. This is another fact that mainstream economists don't understand.
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creati…
Just under two weeks until at least another .5 or more added to the OCR. Also seeing noise of OCR projected to head towards 3.5-4.0. This would lift interest rates beyond 7%. The last time the OCR was here was 2014-2015. Once cannot help but comment on the significant delta from asset prices mid 2015 to now. While wages have increased since then it is absolutely not on the same trajectory.
Speculative debt for the win I guess. Rate rises are not over. Fix for 1 year as per TA and role the dice.
What could go wrong....?
The most interesting thing for me, as a holder of GME (which has been in the green all week), is that GME recently had a split in the form of a dividend. This means that only shareholders should receive the split shares. With the huge amount of direct registered shares (DRS), the supply has dried up and the DTC issued a share split in error. Today, Gamestop made the following announcement:
https://news.gamestop.com/stock-split/?n
According to Gamestop's SEC filing regarding the split in the form of a dividend, the DTC have 90 days to distribute all the shares or Gamestop has the right to remove their shares from the DTC (going to blockchain for transparency).
Years ago, shareholders received a stock certificates, now there is no proof that purchases shares actually exist unless they are registered with the company's transfer agent. Interesting days ahead.
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