In something of a surprise move, ASB has broken ranks and raised home loan rates for fixed terms of less than two years.
These increases set ASB's rate card higher than its main rivals.
ASB has raised its six month fixed rate to 7.09%, an increase of 20 basis points (bps).
ASB has raised its one year fixed rate to 7.04%, an increase of 26 bps.
And it has raised its 18 month fixed rate to 6.75%, an increase of 6 bps.
The bank hasn't changed any other rate at this time.
That means the ASB one year rate is now 44 bps higher than key rivals ANZ, BNZ and Kiwibank, and 6 bps higher than Westpac.
This is perhaps even more of a surprise given that ASB had the highest net interest margin (NIM) of all the main banks. According to the March data released two days ago by the Reserve Bank, that ASB NIM was 2.5% - all the others were lower, and the ASB higher margin has been like that since September 2022.
Competitively, it is the two Chinese banks, ICBC and Bank of China, who offer the lowest rates now for terms of one to two years.
But there are still fixed rates below 6% on offer. BNZ, ANZ and Heartland Bank offer 5.99% fixed for three years. And Westpac also offers 5.99% for four and five year fixed terms.
On Thursday, wholesale swap rates were little-changed across the board. But from the start of May, wholesale swap rates have risen about 20 bps across most terms, somewhat in line with the 25 bps May 24 Official Cash Rate hike.
But with loan demand, especially mortgage demand unusually low, sourcing wholesale funding is unlikely to be a priority. Depositor and saver inflows remain positive, so wholesale loan activity is only likely to be rollovers. However, savers are racing back into term deposits and that will raise bank interest costs noticeably.
ASB itself also raised some [minor] term deposit (TD) offer rates. Its five month TD rate rose 20 bps to 4.50%, its six month rate is up 5 bps to 5.60% and nine month rate is up 10 bps to 5.60%. These rises just match their main rivals.
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 June 2, 2023 | % | % | % | % | % | % | % |
| ANZ | 6.75 | 6.65 | 6.69 | 6.49 | 5.99 | 7.19 | 7.09 |
 |
7.09 +0.20 |
7.05 +0.26 |
6.75 +0.06 |
6.59 | 6.49 |
6.39 |
6.29 |
 |
6.75 | 6.65 | 6.65 | 6.49 | 5.99 | 6.19 | 6.29 |
 |
6.75 | 6.65 | 6.59 | 6.29 | 6.29 | 6.29 | |
 |
7.09 | 6.99 | 6.69 | 6.45 | 6.09 | 5.99 | 5.99 |
| Bank of China | 6.59 | 6.49 | 6.39 | 6.29 | 6.19 | 6.09 | |
| China Construction Bank | 6.76 | 6.70 | 6.59 | 6.55 | 6.40 | 6.40 | 6.40 |
| Co-operative Bank [*FHB special] | 6.55 | 6.45* | 6.55 | 6.39 | 6.29 | 6.29 | 6.29 |
| Heartland Bank | 6.65 | 6.65 | 6.35 | 5.99 | |||
| HSBC | 6.79 | 6.74 | 6.74 | 6.74 | 6.79 | 6.79 | 6.79 |
| ICBC | 6.75 | 6.59 | 6.49 | 6.29 | 6.09 | 6.09 | 6.09 |
 |
6.79 | 6.79 | 6.84 | 6.59 | 6.29 | 6.59 | 6.69 |
 |
6.74 | 6.74 | 6.69 | 6.49 | 6.39 | 6.29 | 6.29 |
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50 Comments
I do wonder if any of the RE news outlets have any knowledge of how banks function? (e.g. how they manage interest rate risk and how they balance their loan portfolios).
I mean if you've been watching wholesale rates recently, it wouldn't be possible to say that mortgage rates have peaked as the wholesale rates were indicating that rates (short term at least) are likely going higher yet.
Perhaps anyone from the RE world who wish to make public annoucements on mortgage rates that sound like financial advice should have to have completed suitable study on bank financial management. E.g. how their funding works, how they manage interest rate risk, what interest rate swaps are etc.
Otherwise I don't understand how or why they feel qualified to do media interviews saying things like 'mortgage rates have peaked' - because you may ask them what the swap rates are doing, and they could look at you blindly with no comprehension of what you are talking about. And yet they are happy to go on television and blindly mislead hundreds of thousands of mortgage holders/FHBs around the nation on this topic. As it stands, when I listen to the RE industry public announcements, it seems completely senseless as often what they say, doesn't reflect how the system works (so its the blind boldly leading the blind).
Don't get me wrong, if wholesale rates don't show any further upward trend, then go for it and say 'rates MAY have peaked'.
And you could potentially say that for 3-5 year terms. I wouldn't disagree with that looking at the wholesale rates.
But you can't say that yet with any certainty for the 1-2 year terms.
It won't be certain until it's certain. Planners in the west are genuinely unsure if this is enough. Look at RBA backtracking on their pause. FED slow marching. The way I see it, if we do get the recession, rates will be cut and assets will take a beating. If we somehow avoid recession, we could be in the peak for a while. There may be a cut or raise here or there, followed by some bag holders leap of faithing it into years of negative gearing.
Either way, I can't understand the spurr around "rates just peaked last week, bottom is in!" - would like to run some numbers on usable equity scenarios and really look at what type of buyer is required to kick start this dead horse other than the FHB or supposed stacks of cash, both of whom I assume are finding the current interest rates on their cash nice and cushie compared to depreciating risk assets.
Disclaimer for HW2s (RIProperty) alter ego whoever you are: these are reckons, I know nothing. The future is uncertain and I find that interesting.
Haha yes I have a few acquaintances in this game, one or two quite successful. I would say their financial literacy is "questionable" at best, and just plain misguided in many ways. They are also not too hot at maths.
But they are very certain of what they know, and not very keen on having it questioned by a mere mortal who doesn't "get" real estate!
Before and after OCR change.
1 year swap for example in April - mid May was trading in the 5 - 5.5% range.
Mid May through now it is trading in the 5.5 - 6% range. Whether is stays in this range is another question!
But can see why the ASB have lifted their short term fixed rates (1-2 years) in response. Wouldn't be a surprise if others follow them.
I posted this the other day.
I can imagine a year from now that we are deep in a recession with interest rates falling, and the central banks hoping to stimulate the economy as we risk a deflationary bust, and yet a bunch of mortgage holders were lured into 4-5 year rates as they rolled over this year - so for it to take 4-5 years for any benefit of lower interest rates to be passed through to those who need it the most.
Hopefully people are smart enough to split their loans up to different durations to limit this risk.
I am not sure the movements in wholesale rates justify these increases. Smells a bit more like ASB trying to push customers onto longer-term fixes. I noted one of the bank economists the other day advising people to be cautious of longer-term fixes at high rates.... whilst their bank was happily pushing rates designed to persaude people to do exactly that!
When you have a lot of customers who are locked into their bank because they can no longer meet LVR or mortgage servicing test rates, you can do what you like to them. And if customers cant afford it, they can sell up and pay back the mortgage, bank wins either way.
"customers who are locked into their bank because they can no longer meet LVR or mortgage servicing test rates"
So it seems that they are mortgage prisoners.
Mortgages prisoners are borrowers that are up to date with their mortgage payments but who are unable to switch mortgage providers because they have a mortgage loan or borrower characteristics that are outside of current lender appetites
https://www.ukfinance.org.uk/our-expertise/mortgages/mortgage-prisoners
Yes, it's a fringe lender, but perhaps a sign of what's to come, everywhere.
New account pays 9% interest as UK savers offered highest rates for more than a decade.
When the boomers were-
in their 20-30s rate were higher as they borrowed to buy houses, raise kids and needed to spend etc.
in their 45s -60s all paid off, high income so lot's of capital and thus lower interest rates.
Now they are retiring, incomes drop/end, non producing burdens..so capital scarce and interest rates rise.
It's demographics, rates wont be going down.
That's is a theory I have heard recently. Sounds a reasonable one to me.
Any thoughts ?
Yip this has been a theory I've thrown out there for around 10 years and been regularly laughed at!
That millennials were facing the reverse cycle of the boomer generation - so the millennials ended up paying too much for assets at low interest rates, then get smashed with rising rates and falling asset prices over the course of paying off the debt (which is the opposite of what their boomer parents experienced).
Also makes sense in terms of supply/demand across the economy in terms of CPI and wages as the boomer demographic retire. They keep consuming, but they stop producing goods/services - thus it causes CPI and wage inflation to become sticky/high.
Interesting to theorise that what made many boomers (not all) wealthy will now deny or restrict their children from accessing the same life opportunities in some of the most important things: Having financial stability via home ownership, ability to afford having children, increasing income over time making a very meaningful difference to opportunities vs currently just to keep from having earnings eroded away from inflation, and cost of living.
So ASB now closely matches Westpac for the 6 and 12 month rates, making them 0.34% to 0.40% higher than the other main banks ANZ, BNZ and Kiwibank.
What should you do if you want to fix for 6 or 12 months with ASB and Westpac? Ask for a discount to match the other three banks? Or is is just a matter of time until ANZ, BNZ and Kiwibank follow suit and raise their rates, too?
Can someone please explain this: 'However, savers are racing back into term deposits and that will raise bank interest costs noticeably.' I thought higher demand for TD's would lead to banks being able to offer a lower rate, thereby reducing their borrowing costs?
I just checked the interest rate on my "bonus" savings account. The net interest rate (i.e. after tax) is now line-ball with my 5 year mortgage rate. It doesn't feel like too long ago that I was hoping TD rates would get high enough to reach this position.
I know I'm losing out on interest by not moving the funds to TD but I prefer liquidity at the moment, one never knows when an opportunity will arise.
I'm not sure what the banks are doing with their stress test, the broker is saying we could borrow 55% more than our bank would give us for pre-approval. I get that a live deal and a valuation on the property that matches the offer helps but it seem like our bank doesn't want our business.
Haha...payment from the development company that is selling the property. Scam alert.
Odds on it goes into liquidation as soon as the last one settles and money extracted leaving any subsided buyer facing the full payment. An old scam just like the rent guarantees from Blue Chip.
Don't be a debt patsy Just demand 100k of the price and leave the loss with the developer.
I trust the "rates have peaked" in hindsight as much as I should have trusted rates will stay low for longer min 2024 !!!! remember those statements .... fact is we are forced to follow the overseas major money markets ... the comment from RBNZ rates have likely peaked seen the NZD sell off ,,, in turn increasing cost Inflation .. we also have fuel tax coming back ... I'm stunned everything I spend money just how much costs have inflated ..and if we truely are going down the road to NET ZERO agenda .. we will see all commodities inflate .. they have had a major pullback recently but thats about to turn as the reserves of this commodities continue to shrink without the investment ...
DEFLATION can only come about from productively gains ... talk of AI will do it ...bollocks
The best time to buy property is when interest rates are high. There'll be bargains out there, but they have to be in the right areas - where there's future development, access to motorways, on the edge of major cities. Historically property's been a good bet, I bought my first house in Auckland for $37,000.
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