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Mixed in with ANZ's floating mortgage rate & term deposit rate hikes, are chunky fixed mortgage rate hikes too. But wholesale rates influential for fixed home loan rates are falling. Opportunities for borrowers are opening up

Personal Finance / analysis
Mixed in with ANZ's floating mortgage rate & term deposit rate hikes, are chunky fixed mortgage rate hikes too. But wholesale rates influential for fixed home loan rates are falling. Opportunities for borrowers are opening up
[updated]
rate direction questioned
Source: 123rf.com Copyright: tomertu

Table below updated with Westpac's changes. And further with ASB's changes.


ANZ not only raised its floating rates for home loans following last week's 75 basis points Reserve Bank (RBNZ) Official Cash Rate (OCR) hike. It also raise all its fixed rates too.

The bank made the point that their rates are reviewed "in response to international and local market conditions." The local influences are basically driven for short terms, one year and shorter, by the RBNZ policy settings. The international influences are much stronger on the rates for two years and longer.

And those international influences are clearly driving wholesale rates lower. 

So why is ANZ pushing longer rates higher?

ANZ is saying; "With the change in OCR and the expectation that the OCR will now have to go higher next year, there has also been changes in wholesale rates which has an impact on fixed interest rates for home loans."

But a quick check of the swap rate charts below might have you questioning that claim. Maybe some increase can be assigned to that, but 55 basis points? or even 35 basis points? Hard to see.

Two year swap rates are now more than 10 basis points lower than their October levels. Three year swap rates are more than 30 basis points lower. And five year rates are 50 basis points lower. But ANZ has now raised fixed mortgage rates by 55 basis points or 35 basis points. That opens up a rather sharp difference that is not being driven by wholesale rates - yet, anyway.

ANZ seems aware that these fast rising rates will hurt. A spokesperson said the bank was proactively reaching out to customers who showed signs of needing reassurance or support and encouraged anyone who had concerns to get in touch. “People shouldn’t be nervous about talking to their bank, we’re here to support customers with the various options available to them," he said.

ANZ may have to watch what its rivals do now. The expectation is that most of them will fall in line to take advantage of the margin-build that ANZ is permitting.

But there may be some who see an opportunity to grab some market share while the variations are so large.

Between ANZ and (say) BNZ there is a 65 bps difference in BNZ's favour for a two year fixed home loan. For three years it is a 59 bps advantage. For five years it is a 135 bps advantage that a borrower can lock in by not choosing ANZ. These variations at this time are too large to ignore.

We are not saying they will last. They could be gone quickly. But if they do vanish it will not be because of wholesale rate pressure.

In fact, there is a case now for five year fixed rates to be lower than two year fixed rates. It is not unprecedented.

Because variations this large are unusual, the option for one or two banks to test what it will do to borrower behaviour to get a meaningful switch going on might be tempting. ANZ has form in pushing through aggressive rate hikes, only to have to reverse them because no-one else followed. It is rare to be fair, but has happened a couple of times.

And because increasing volumes are being driven by mortgage broker activity, it is unlikely that ANZ will be able to just wish away the trend. Brokers will be much harder-nosed about this than random and independent mum-and-dad borrowers who only get to talk to a bank mortgage manager.

One useful way to make sense of the 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 December 2, 2022 % % % % % % %
               
ANZ 6.60
+0.55
6.54
+0.55
6.64
+0.55
6.74
+0.55
6.84
+0.55
7.54
+0.35
7.64
+0.35
ASB 6.50
+0.55
6.54
+0.55
6.64
+0.55
6.74
+0.55
6.84
+0.55
6.99 6.99
5.99 5.99 6.09 6.09 6.25 6.29 6.29
Kiwibank 5.95 5.89   6.15 6.29 6.39 6.39
Westpac 6.49
+0.50
6.49
+0.50
6.59
+0.50
6.69
+0.50
6.69
+0.50
6.69
+0.40
6.79
+0.50
               
Bank of China    5.75 5.85 5.95 5.95 6.15 6.15
China Construction Bank 6.50
+1.00
6.54
+0.55
6.64
+0.45
6.74
+0.45
6.84
+0.45
6.85 6.85
Co-operative Bank [*FHB special] 5.79 5.69* 6.05 6.15 6.29 6.39 6.49
Heartland Bank   5.75   6.05 5.95    
HSBC 5.79 5.94 6.04 6.09 6.19 6.59 6.69
ICBC  5.75 5.75 5.85 5.95 6.05 6.29 6.39
  SBS Bank 5.85 5.89 6.05 6.09 6.19 6.29 6.29
  5.79 5.79 6.09 6.15 6.29 6.39 6.39

Fixed mortgage rates

Select chart tabs

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Daily swap rates

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Source: NZFMA
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Source: NZFMA
Source: NZFMA
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Source: NZFMA
Source: NZFMA

Comprehensive Mortgage Calculator

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90 Comments

Things just got very real

Up
27

You mean very interesting!

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2

Very interesting move by ANZ to hike the 1-5 year fixed mortgage rates at a time when the underlying hedging interest rates (Interest Rate Swap curve) is falling as are the NZ Government Bond yields.  Could it be out of step with the market and need to reverse this move in 1-2 weeks?  Could it be coming off the Nov-Dec 2021 housing peak where many had fixed their mortgages just out a year at the now very attractive one year levels around 4.20% and now need to contemplate the ANZ's new 1 year fixed rate of 7.14% (whereas yesterday it was a slightly more palatable 6.59%)?  Also interesting to see some market leading term deposit rates out there by the same organisation that this time last month said they don't have to offer market leading term deposit rates...plenty to think on

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6

Westpac just followed suit.

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1

Great comment G&S, as exemplified by the total lack of thumbs up.

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1

Is the table right? Seems to compare ANZ's standard (i.e. above 80% LVR) to peers' 'special' rates.

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4

Yeah doesn't look right, will be making some people here get excited...

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1

grrr. Yes, our mistake. Fixed now. Sorry

Up
9

"ANZ may have to watch what its rivals do now. The expectation is that most of them will fall in line to take advantage of the margin-build that ANZ is permitting"

I don't think this is about margin-build. I think this is ANZ panicking and trying to de-facto cease new lending. They are deliberately raising rates to a point where they aren't competitive relative to the competition. So that no one will borrow from them. I imagine their sales men will offer significant discounts to borrowers deemed "safe" however anyone with any risk will be told to pay the new significantly higher rates or shop elsewhere. Naturally these "higher risk" borrowers will then look elsewhere. In essence ANZ is looking to offload some of its high risk borrowers to the competition.

The is a great quote in the movie margin call by the John Tuld character played by Jeremy Irons. "There are three ways to make a living in this business: be first, be smarter, or cheat". Looks like ANZ have worked out if you are going to panic, make sure you are the first to do so.

Up
22

Yes they will have a lot of discretion at refix time.  

"Oh you have 40% equity, here's an 0.85 discount off the card rate" 

"8% equity, card rate it is".  "b-b-b-b-b-but I can get less 50 from......"   "That's nice, see ya".  

Up
7

More like "8% equity.. I can't get a loan anywhere else and i'll have to  choose from the menu of dead rats  ANZ is offering."

Up
7

An iconic and timeless movie. To also quote that same character:

"I'm here to guess what the music might do a week, a month, a year from now. That's it. Nothing more. And standing here tonight, I'm afraid that I don't hear a thing. Just silence."

I wonder what John Tuld would be saying today. 

 

Up
5

Margin call. I re-watch it with probably the same awe and excitement as I did the first time.

Easy to miss were the subtle moments where both characters played by Paul Bettany and Kevin Spacey inherit the financial risk team, but have no clue what the analysts even do, let alone how their models work.
Personally have never worked for a bank but isn't uncommon in the insurance sector.

Up
7

I agree. [Edit: i had the dates around the wrong way, the statement was incorrect].

The want to keep the good debtors, and lose the more risky ones.

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4

You either lose those risky ones if there are other willing lenders in the market, which there really aren't. Many who fall in this cohort will likely be increasing their periodic payments to meet the stress test requirements, cutting back further on other spending.

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2

Yup. The net effect is those that are already feeling the worst effects of rising interest rates. Get the double whammy of having to also pay a premium above "de-facto market rates".

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3

This seems likely to create a subset of angry working poor within the (nominally) landowning classes.

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2

Good point.

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0

Like I said back in 2019.  A massive bait and switch in play. 

"Oh you'll be fine, the banks test you at 8%"  "We could have negative rates soon".  LOL.  

by Nzdan | 14th Nov 19, 7:05am
Banks probably want interest rates to rise after a prolonged period of increasing loan book size. A bait and switch of sorts. Get everyone juiced up on low lending rates and then tighten up the vice on the balls.

Up
15

60 properties auctioned so far this week by Barfoot. 3 sold, three.

Seeing a tonne of properties priced at or near their 2017 CVs.

The Block NZ has just cancelled their 2023 season due to a "challenging housing market", a first.

Things are about to get nasty.

 

Up
39

Checked yesterdays auctions this morning. 25 properties offered, 1 sold.

sold $1,263,000

CV 2021 $1,650,000

CV 2017 $$1,135,000

Rolling back fast.

https://www.qv.co.nz/property-search/property-details/1688466/

Today looks to be doing about the same with just one sale (a very expensive sale on Paritai Drive selling below its CV).

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6

Whats very frustrating is that majority of sales are now being listed as 'TBC' to keep the algorithms at bay.

Up
18

I agree, we have a big problem with it here, but agents have shot themselves in the foot as buyers are quite informed and they have told venders they will get the ridiculous prices so they are doing a lot of work on a lot of listings with no sales. Prices are starting to drop on one or two properties here

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4

By law they can only hold off so long though. I believe you have 3 months from settlement to lodge the sale info. Making it public info. I imagine the realestate companies will do a data dump over the X-mas break when no one is paying attention.

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16

If you are talking about sales prices on Homes.co.nz, from what i've seen this is entirely normal.  When we purchasing in 2020 our place was listed as TBC for ~3months, nothing to do with any conspiracy, just the process they use to confirm sales prices.

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1

Good to know thanks. Its variable, some go up straight away and others don’t. But I wasn’t aware of the process.

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1

Homes.co still shows ours as TBC and we bought it 3 years ago.

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4

Private sale?

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0

No, we think it's because we bought the house for around 50k cheaper than similar houses in our area were selling for at the time so by leaving the price as TBA it wouldn't reflect negatively on the agent. The agent lives in our area as well and drives passed our house on the way to work so I doubt they forgot to do it.

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2

House on our street sold for a really outrageous amount 18 months ago ….. it never got the price put into homes, is still TBA now. Our house bought at the same time got the price published the day we went unconditional. Not sure homes has to follow the rules of publishing that someone like QV has. Sad because it’s a useful site and worked well here until agent valuations were added ( during 2021, always very high)  and also now when sale prices failed to go in, our area is showing strong growth on top of the 2021 peak. Agents are just saying the data is a year out of date.

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2

That's interesting about the high price house, I agree that I don't think Homes need to follow the same rules as QV. I may be wrong but I think of it as a website manipulated by agents for their advantage and I look to other websites for property information.

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1

https://homes.co.nz/homesestimate
 

They publish the data accuracy here under “How accurate is the homes estimate” over the last three month period. Not good in my area, only a third of sales are within 10% of the Homes estimate and just over half make it to 20% of the Homes estimate. That means half the sales are not even getting to within 20% of the estimate, over the last 3 months you can bet the sales price will be below the estimate; not above it.

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2

Be quick!!!!!

Up
5

And my hand plunges quickly into the popcorn.   Um umumum um umum...!

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2

"The Block NZ has just cancelled their 2023 season due to a "challenging housing market", a first"

'Irrational Exuberance' by Robert Shiller - one of the key signs to look out for when determining if you could be in a housing bubble is the popularity of property shows (location, location, location or the block etc) on television.

That the block is cancelled should be the canary in the coal mine (if people aren't aware of the risk yet)

Up
22

Cancelling the dreadful HGTV Freeview channel would be a nice follow on

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2

Why pick on HGTV?  Are you a fan of the Masked Singer?

 

Having said that, there are some bad shows, although Mike Holmes is a cool guy.

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0

I think they have missed a ratings goldmine. There is nothing funnier than seeing people spend a lot of time and money and then lose their shirts. The look on their faces is priceless. They don't even have to fabricate the dramas now.

'Whatya mean house prices don't always go up? You mean I slept with one of the other contestants for nothing?

But seriously, you know the shit is about to hit the fan when even TV shows cannot spruik a happy ending.

Life is about to imitate art. We have been building up to this for the last decade at least.

Up
13

Perhaps a show about young folk learning to build tiny houses and work around council costs might be more suited for the times.

Up
6

Westpac is increasing a range of its home loan interest rates...Standard rates range from 7.09% to 7.39%.....Banks were unlikely to compete hard for market share at the moment while house prices were falling.

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1

"Between ANZ and (say) BNZ there is a massive 125 bps difference in BNZ's favour for a two year fixed home loan. For three years it is a 119 bps advantage. For five years it is a 135 bps advantage that a borrower can lock in by not choosing ANZ. These variations at this time are too large to ignore."

A tad disingenuous to compare ANZ standard rate with BNZ special. 

Also, instead of comparing 2 and 3yr swaps with October, should they not be compared with the last time they were this high? What were they then? I was of the understanding that previous lifts in swaps had not been passed though, so this could be unwinding that. 

Looking at int.co charts, last time swaps were this high, (Nov '08 for 2yr and Jan '10 for 3yr) the retail rates were around 8%. 

Up
1

Yes, that original comparison was wrong. Our mistake. It is updated now. Point still stands though.

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1

Stress testing at 9% then?

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2

Yes they should be, right.

wow that’s really going to nuke the market

Up
2

Great article DC and thanks for including the fixed rates today, I was hoping to see them in yesterday's article about ANZ raising their rates.

Up
5

Have ANZ ever been competitive with lending rates? How do they lead market share?

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1

Most people find changing banks a pain in the posterior.

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2

You don't even have to change banks to move your mortgage. My main transactional account is with Westpac but my mortgage is with Kiwibank, I just have a couple of automatic payments setup to shuffle money around. On call savings are with Heartland. 

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4

Before Jacindas housing bubble eliminated my mortgage I always had it with Kiwibank. Always the cheapest and never understood why people paid more to be with other banks?

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0

TSB are cheaper...

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0

Ashley Church an Independent unbiased expert with headline.....everyone knows that nothing is permanent and price will rise again but WHEN Mr Ashley ? us the key.

Ashley Church: We’ll soon be complaining about rising house prices again

https://www.oneroof.co.nz/news/42610

 

Up
7

TA said only this morning that we're only likely to see an increase of a quarter of a percent from the banks between now (then) and the peak.

Opinions with a shelf life of an hour or so...

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11

According to Bernard Hickey, FOMO will be back and the market will be bouncing back by summer 2023.

https://www.interest.co.nz/property/117184/bernard-hickey-argues-fallin…

🙄

Up
3

Yes garbage opinion. 
I think there is a decent chance that the bust will have stabilised by late 2023, with perhaps a very small uptick in prices late ‘23 / early ‘24

Up
0

Ah yes the old "non-financial" financial advice from Bernard Hickey.

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5

Been seeing his rants bubble up on LinkedIn...crikey dick, what's happened to the man? He's gone full stereotypical talkback ranter, with all the standard ranting points that might be expected from the usual algorithmic inputs. 

Up
3

I blame Anne Gibson, Liam Dann and the Herald hierarchy much more than I blame Ash or Tones. 

Up
4

Swaps on the longer end may have pulled back from October, but the longer trend is still very much upward. 

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3

The govt bond markets globally are starting to factor in the inevitable rate cutting we will see in due course after the recessions have kicked in. USTs, Gilts etc all have curve inversion telling the same story. I don't think we are likely to see the long ends blow out again, rather if the short end overshoots care of wreckless further hikes, we are more likely to see steeper inversion.

Up
0

100 billion plus of home lending. 30% share of the market in NZ. How hard did they go in the no LVR period 2020-2021?  They had a 9 billion increase in Mortgage Book SEP 20 - SEP 21.

How many mortgage prisoners do they have on their books now? Better reinstate some of that bad loan provision.

Up
4

So Westpac have (mostly) followed ANZ. It would be really interesting if one bank doesn't move rates for 2 years and over, to increase their customer base.  I think other banks couldn't live at the higher rates and would have to u-turn their longer term rates.

Up
2

It's going to become very competitive. They're likely competing to offhand the lowest bidders to other banks and let them deal with the fallout. Push the rates higher and clean up the loan books, while stressed leveraged borrowers shop around for cheaper rates elsewhere to delay the impact.

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2

Having more expensive interest rates doesn't provide banks with customers in better financial situations.

Up
4

Eventually it does. If you can purge clients who can't afford higher rates, overall your customer base will be of higher value as they are lower risk.

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2

True, but they run the risk of purging the low risk clients as well, as those are the ones who can easily shop around for the best rates.

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1

Maybe they'll set up a new tier of "special special" rates for borrowers with >40% equity that they will actually compete on to keep the low risk clients

Up
0

Would be a lot less painful if banks, much like Landlords with rent, were limited to how much they can increase interest rates on an existing loan.  Let's say it's limited to a 20% increase.  This would also most certainly help with the pressure many Landlords (and their tenants) are facing.  

Someone on a 2.5% fix will be able to refix at 3%.  But instead we have people who last year took out a mortgage at 3%, were tested at 5.8%, who are now facing rates at 6.5%.  

Up
2

It's a good point, NZ has no fixed rate mortgage products >5y and with a central bank like ours we really need them. The only point I would add is that borrowers could have fixed for 5 years at any point but those rates were higher than variable. There are certainly investors who will lend 10+ years so I can only assume borrowers don't want the break costs if yields fall. This is where the US mortgages are so attractive.

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2

My understanding is that the only reason 30-year fixes work in the US is that fannie and freddie backstop them. So while it might be desirable from a borrower's perspective, not sure that it's a good policy all up. Yes a slightly larger market might help, the UK seems to have 10 and 15 year options, if not necessarily widely used.

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3

Would be good if we were like the USA and the fixed rate you signed up to was for the 30 year period.

Up
0

Which side are you on?  From past posts I thought you wanted the market to crash and interest rates to go double-digit?  I just read this post and it's the complete opposite tone!

 

This post you just made I agree with you.  They are hurting the FHB's who were stress tested at a completely different number at that point in time.  They should limit the hike for those FHB's and protect them.  I feel bad for those FHB who just wanted to buy a home to live in and raise their family.  I don't care too much for speculative buyers or investors.  But I think there were more FHB's when interest rates were low and they could borrow more.  It's not their fault for housing prices shooting up.

 

-7

Up
2

I would love to see the market crash and investors who overleveraged get burnt.  I enjoy the feeling of schadenfreude.  But in doing so, I think we can crash the market without burning FHB. 

We had state advances loans of 3% back in the day, this could be done or as per my suggestion limit the increases. Their deposit is gone but they can still service the roof over their head.  

A 260% increase in interest rates in 12 months on existing lending is exorbitant.  Blame the Reserve Bank sure, but if the banks actually retained earnings and lent more of their own money they'd have much more control over the price of credit.  

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3

Worth factoring in to the discussions the point that via FLP the state has been subsidising the banks, so when the hard times are hitting their is some level of obligation upon them to do their part for society. Like ANZ CEO Antonia Watson put it, consider it "an investment in New Zealand".

Banks and society must have some measure of symbiosis.

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1

You raise an interesting point.

Note that landlord's rent increases are not limited to certain percentages though - they are limited to 'market rates'. Which I would argue is exactly the same as what the banks currently are.

I do think, however, that for owner-occupiers, the mortgage on their primary residence should be capped at whatever value they were stress-tested at. Watch the banks use real values in that case!

This whole scenario has been driven by the banks, whilst the RBNZ were asleep at the wheel.

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2

Fair point re:Landlord rents.  The test rates should definitely be used as a rate ceiling for OO lending.  Make it fair and include a rate floor, because someone who borrowed at 10% is likely to have a smaller loan than someone at 5%, if the banks are forced to limit their opportunity on gains then the same should apply for "losses".  

In this arrangement, if the banks find it difficult because the RBNZ keeps increasing the OCR, then maybe the banks should retain a little more of their earnings and lend from those?  Lend their own money instead of someone elses......

 

Up
1

Rents aren't limited by the 'market rate' - rather rents are limited by the Accommodation Supplement maximums and willingness (or otherwise) by landlords to allow over-crowding (i.e., unofficial sub-lets).  Whereas house prices have decreased 12-15% yoy - rents have increased by 8% (and I believe that number is only based on new bonds lodged).  Rent increases are riding well above inflation.

 

Up
3

And who would pay for the associated financial risks due to the resulting interest rates exposure of the lender, and what would you be the resulting financial stability of the banks? If banks were forced to do that, they would be forced to offer mortgages at much higher rates in the first place, in order to compensate for such additional risks. This whole proposition does not make any sense. 

Up
0

Mortgages should have been at much higher rates over the last few years.  The only people who have benefited from low interest rates is.....wait for it.....people who borrowed back when interest rates were higher!  

If mortgage rates were higher, then lending amounts would be lower, it would all balance out.  We now have the alternative where there was not enough "risk", and lending was priced accordingly, and the risks are greater because we have young people owing 10 x their income with rising rates.

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2

I'm thinking the margin over swaps is banks getting ahead of the game and increasing to cover potential losses as defaults pick up next year.

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0

Did westpac pass the full 75bp into floating rate?

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1

FLP coming off 6th December, how is this going to play into things?

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1

Simple, banks can't clip the ticket for a few extra percentage points of profit, they have practically drawn out all the funds from it which will tide them over for a while, then they'll be even stricter on their lending claiming the govt isn't helping them anymore. Must be really tough making record profits hey

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6

Brutal

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2

Holy smoking guns Batman. Duck for cover

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1

Banks need to fall in line with Orr. Either they voluntarily raise their rates now.. slowly carefully and until inflation cools.. or he will raise the OCR anyway and pull any other levers he can find to force rates upward and needlessly doom the economy... the easiest path for anz and the others seems to be to get with Orrs wishes.

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1

This is how the rich get richer and the poor get poorer. And on Labours watch?

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3

On everyone's watch.

In capitalism, wealth usually consolidates.

Debt is the only chance many people have to reverse this, but it's not for everyone.

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2

The cycle of the reserve currency is proving accurate thus far. The next qualm is what will happen with Russia, will Putin get knocked off or overthrown by his own citizens. I can't see China actin on Taiwan with the current anti government sentiment growing there, and civil unrest will only grow over time with the strict lockdowns. Will the world back the USD if a conflict breaks out and they are already overstretched in their global realm? Jockey jockey jockey goes the world order

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0

.

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0

For me what's interesting is the 1year to 5year spread.  1 year is 6.5....5 year is 6.99.  The difference per year is around 0.1 steps per year.

If i recall when we were at low interest record rates, 1 year was 2.49....while 5 year was still at 4.99.  

You can say it's their "prediction" of what rates would be like in the future.  But I have a feeling they are enjoying profiting off the backs of NZ'ers.  But hey, maybe i'm wrong right?  Banks never want to profit off people, they are good samaritans looking out for the greater good, right? lol

 

 

-7

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1