New Zealand's largest home loan lender, ANZ, has announced fixed rate reductions for both home loans - and some term deposit rates.
The home loan reductions are for the popular two and three year fixed rates, but don't include the even more popular one and 18 month rates.
The term deposit changes are reductions in the-less-than-popular two, four and five year rates.
ANZ says it has "made changes to some of our fixed home loan and term deposit rates to reflect the recent decrease in wholesale swap rates".
And yes, wholesales swap rates have reduced on global trends, although this week they have turned up very slightly after a long decline.
After peaking in early October at 5.96%, the one year swap rate has fallen to Tuesday's 5.38%. That is a 58 basis points retreat. The two year swap rate has fallen almost twice that, by 95 basis points.
To be fair, banks did raise them on October 24, which responded to the early October peak. Prior to that, ANZ raised them early July, and then ASB made a public showing of "restoring margins" after their Aussie boss complained about not being able to make any money at those levels.
So from early July, the net change is little different even though that was another peak and rate changes in between haven't really reflected the 'down' periods in place over much of the intervening period. Eyeballing the swap rate chart below reveals those longer lower periods.
However, banks have also been under pressure to pay savers more and they have responded with attractive six, nine and 12 month rates. Savers looking at the swap rate charts might be sweating an onset of lower deposit rate offers. But from ANZ that isn't happening yet. To its credit ANZ is holding those popular TD terms unchanged - even if its offers are 'mid-pack good' but aren't market leading. (And as the ANZ Australian boss explained to analysts, in New Zealand they have a dominant position and don't have to offer the best).
Obviously you should negotiate and shop around. Most banks will discount their carded home loan rates if you have strong financials. You shouldn't need them but if you are uncomfortable negotiating, a broker can often be helpful. But be aware some brokers won't offer you the best over the whole market, only the banks they have approved connections to in their "lending panel." And clearly bank mobile managers are there to pitch their company's own product.
They may even offer savers higher than carded rate offers.
Challenger banks usually offer better rates - although not always mainly because most lack ready access to wholesale markets.
One useful way to make sense of the changed home loan rates is to use our full-function mortgage calculator which is 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. They will become important in a falling market however.
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 20, 2023 | % | % | % | % | % | % | % |
| ANZ | 7.35 | 7.39 | 7.15 | 6.89 -0.20 |
6.75 -0.14 |
7.34 | 7.34 |
 |
7.45 | 7.45 | 7.15 | 7.05 | 6.85 | 6.75 | 6.69 |
 |
7.39 | 7.35 | 7.15 | 7.05 | 6.85 | 6.75 | 6.75 |
 |
7.39 | 7.35 | 7.05 | 6.89 | 6.79 | 6.79 | |
 |
7.39 | 7.39 | 7.19 | 6.99 | 6.75 | 6.69 | 6.49 |
| Bank of China | 7.09 | 6.99 | 6.89 | 6.79 | 6.69 | 6.59 | |
| China Construction Bank | 7.19 | 7.09 | 6.89 | 6.75 | 6.49 | 6.40 | 6.40 |
| Co-operative Bank | 7.30 | 7.30 | 7.15 | 7.05 | 6.85 | 6.85 | 6.85 |
| Heartland Bank | 6.99 | 6.89 | 6.85 | 6.65 | |||
| ICBC | 7.19 | 7.05 | 6.95 | 6.85 | 6.59 | 6.49 | 6.49 |
 |
7.55 | 7.55 | 7.25 | 7.15 | 6.79 | 6.79 | 6.79 |
 |
7.39 | 7.39 | 7.19 | 7.09 | 6.85 | 6.79 | 6.79 |
Fixed mortgage rates
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75 Comments
Strange move this close to Xmas/New Years shut downs. As expected they havent touched the 1 year. The new 6.75% 3 year is not really much of a bargain at his stage. The 5 year TD cut back to 5.2%, if you are are long term TD investor, grab that ASB 5 yr 5.55% while you can.
Pointing out why prices won't fall like many keep prophesizing, and the consequences for the little man on street should they do, isn't the same thing as wanting them to rise.
This is supposedly a financial site trying to form a reasoned view of things economic. Using it as a soapbox for what you hope will happen, runs fairly counter to that.
BP have suspended shipping through the Bab-el-mandeb straight, as have 7 out of the 10 largest shipping firms globally.
Insurance costs soaring for it due to Houthi rebel attacks and ships rerouted around the cape adding 2 weeks to journeys.
Oil and gas prices already up, with most other items likely to join given 30% of global container traffic passes through this most strategic of choke points.
The battle against inflation is by no means won by central banks. Shocks like this are going to continue to cause havoc and put pressure to raise rates
The RB really has no control over the popular 2 year rates, which will be down to 6% well before the RB makes any decisions on the OCR.
Floating rates are popular in Australia because they are only 6.4%, and that is at their peak! Here, you have to be a mug to pay 8.6% Floating rate.
Unlikely that they'll be targeting the same entry level properties though. Investors, however, are competing directly.
Even if the DTI levels are the same, if the treatment of rental income is at all sensible their introduction will be a serious drag on investors who want to buy a second, third or more rental property.
I think it's a net benefit for FHBs unless the RBNZ really drop the ball. They have certainly shown before they are sensitive to being seen as squashing young buyers dreams.
Investors often have other income outside of rent to bring to the table though.
It's really a net loss. While people having been singularly focused on investors, there's been a protracted effort to remove risk from the credit market, by clamping down on super low deposit mortgages, and more stringent lending criteria. This all serves to reduce non-owners ability to enter the market (compounded by price rises at the same time), and a DTI would only serve to amplify that.
What they also bring to the table is existing debt. The standard practice of rolling equity into new properties stops working pretty quick when you have to divide outside income between two of three properties with a DTI limit.
The data shows investors tend to borrow at higher DTI ratios than FHBs, so even if the same level is chosen for both groups it will preferentially target investors and reduce competition for FHBs. A small percent of FHBs will be cut off, together with a much larger percent of investors.
Could result in less leveraged landlords too, subsequent leveraged purchases would be benchmarked against the new rent.
- Assume $200k household income. $2m home.
- 2 rentals @ $500k each rented at $30k p.a. = $260k overall income
- Assume DTI is 5. $1.1m in mortgages, $300k on each rental, $500k on house. DTI = 4.3.
Want to buy another rental, $500k @ $30k again. New income = $290k. New borrowing capacity = $1.45m (+$350k). Where do they find the other $150k? Remember we're talking leveraged purchases.
What it'll do is reduce the ability for all sorts of buyers (so FHBs, current owners and investors) to borrow for purchases. FHBs likely the most, as their ability is usually the lowest.
It'll result in higher rents (as less landlords and more people needing to rent), less new properties being built (less of any sort of buyer can afford them), and retained competition for the limited number of existing stock on the market.
It will also reduce house prices, because people won't be in a position to pay the high prices that the market has accepted for poor quality homes due to loose credit availability. Over time, this would be a good thing. Houses are far too expensive in NZ relative to incomes.
It won't reduce house prices to any degree that'll increase the rate of FHBs. The inverse will occur, you will have less new houses so more buyers competing for a smaller pool of available property.
Then after about 10 years, someone will say "hey, this didn't improve affordability, maybe we should look at addressing the various issues inflating supply".
What data are you basing this on? I think you're mistaken. Here's some numbers from the RBNZ DTI data
% of new commitments with DTI > 7: 1% of FHB loans, 7% of investor loans
% with DTI > 6: 6% of FHB loans, 18% of investor loans
https://www.rbnz.govt.nz/statistics/series/lending-and-monetary/residen…
Regardless, they will have to change tactics if a suitable DTI is introduced and this will reduce investor buying. Rather than having 4 properties in the portfolio with high DTI, maybe they are only able to fund 2 or 3. Then it's a long wait paying down debt before the next addition.
There's definitely things they can do, that they're not due to self interest and political expediency.
Most things they've tried have indeed made things worse though.
Might be worth noting that neither the current or previous government have really made much noise about improving affordability for FHBs. It's only a fairly small demographic.
That may often be the case, but here the data is clearly contradicting his position.
Of course, DTIs are the responsibility of the RBNZ although the government need to approve its use. The RBNZ have shown in past statements and actions that they are keen to spare FHBs from the worst of their restrictions where possible.
If you reduce the number of investors in the rental market, exactly who is going to provide the houses for the 130,000 people we are importing each year?
2024 is going to be an interesting year, as Australia has just cut back the number of international students they are taking. They made the mistake of giving international students unrestricted work rights post covid, and as a result there are now over 850,000 people in Australia on student visas. Most of them not really students at all, but unskilled workers pretending to be students. Those that cant get an Australian student visa will simply switch to NZ and come in as students or under the Accredited Employer programme where the employer doesnt have to prove there is a job, or that the job cant be filled by a NZer, or that the person they are bringing in has the skills to do the "job" (which isnt really a job but a form of indentured servitude as the worker pays the employer back for their visa sponsorship).
The RBNZ releases show there's a lot more lending activity to property investors at high DTIs here in NZ. It makes sense given rent to house price ratios. Investors may be able to finance their own property and maybe one investment property before exceeding the DTI limits using the income from their regular job(s), but unlikely to be able to finance much beyond that.
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