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Six days after Westpac moved, and the inflation shifts became clearer, our largest bank has now moved retail rates lower.
But they have gone 'one better' than their rival, setting their carded fixed mortgage rates lower; in fact for terms out to three years, they now have the lowest carded rates in the market.
Although this is good news for borrowers, these moves lower bring bad news for savers.
Equally large reductions also apply to their term deposit rates.
They have cut the popular 6 month term by -15 basis points (bps) to 5.75%. Their nine month rate is down -25 bps to 5.75% too.
For one year, the cut is -20 bps to 5.70%, and for 18 months the cut is -30 bps to 5.60%.
Rate offers for terms longer have also suffered large cuts up to -30 bps. But these terms are not popular with savers in the first place so are likely to be ignored.
The recent Reserve Bank (RBNZ) dovish monetary policy review, international rate falls in wholesale rates, and Wednesday's softer Consumers Price Index (CPI) inflation rate have all changed the battlefield landscape to one where the door is open for rate reductions.
But it is a risk. Non-tradable inflation is still very high and not really responding to the RBNZ pressure. That may motivate the central bank to hold its rates for longer at present levels. And if the US Federal Reserve cuts before them, then international demand for higher yielding New Zealand investments may also give the landscape another twist.
Very low housing market activity, and soft commercial loan demand, both mean banks don't need funding lows as strong as they have been
The carded rates we report here can be different to the rates banks might offer in their banking app. We would like readers to reveal what their banking app shows as the potential offer rates. Please add that market intelligence in the comment section below.
A quick check of the wholesale swap rate chart below gives a clear understanding of where funding costs are heading.
Even though the RBNZ has not actually cut official rates yet, the market is doing that "for them". Words and signals matter in financial markets.
In a falling market, the squeeze will go on challenger banks. ANZ and Westpac's move has eliminated much of the rate advantages they thought they had. Then again, some challenger banks now have big advantages for savers - large enough to demand a second look before they too trim their term deposit offers.
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. Break fees will be minimal in a rising market. But they 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 July 18, 2024 | % | % | % | % | % | % | % |
ANZ | 7.05 -0.20 |
6.85 -0.29 |
6.69 -0.20 |
6.49 -0.30 |
6.35 -0.30 |
7.14 -0.20 |
7.14 -0.20 |
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7.24 | 7.14 | 6.89 | 6.75 | 6.39 | 6.39 | 6.39 |
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7.24 | 7.14 | 6.89 | 6.79 | 6.65 | 6.55 | 6.55 |
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7.25 | 6.99 | 6.79 | 6.65 | 6.55 | 6.55 | |
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7.05 | 6.89 | 6.79 | 6.75 | 6.39 | 6.39 | 6.39 |
Bank of China | 7.09 | 6.99 | 6.75 | 6.65 | 6.49 | 6.39 | 6.39 |
China Construction Bank | 7.19 | 7.09 | 6.89 | 6.75 | 6.49 | 6.40 | 6.40 |
Co-operative Bank | 7.24 | 6.99 | 6.89 | 6.79 | 6.65 | 6.55 | 6.55 |
Heartland Bank | 6.89 | 6.69 | 6.55 | 6.35 | |||
ICBC | 7.19 | 7.05 | 6.79 | 6.75 | 6.59 | 6.49 | 6.49 |
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7.35 | 7.14 | 6.89 | 6.49 | 6.35 | 6.19 | 6.19 |
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7.39 | 7.14 | 7.19 | 6.75 | 6.65 | 6.59 | 6.59 |
Fixed mortgage rates
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40 Comments
I wonder whether the banks are lowering their rates in order to bail out their development loans? The amount of unsold townhouses sitting on the market right now is quite extraordinary. Two developments a street over from me still have unsold units, and they have been on the market since the beginning of the year. Another two developments on the same street are about to complete and join them. If the developer cant sell them they cant repay their bank loans. Then all hell breaks lose in the banking system.
Most people will not pay to break a higher rate, the banks can easily see when the current mortgages they hold are going to roll over, so its easy for them to model what they believe rates will be once these mortgages roll. The swap rate is well lower and there is going to be a lot of competition on the way down.
I am not so sure that banks have been lending much to developers, I think they have been using secondary finance sources.
I think banks are more worried about late entry investors, and people losing their jobs here.
Yes whilst the main focus on this forum tends to be on the effects on borrowing the other side of the coin is those with savings in the bank that have been enjoying a solid return in recent times… decisions will need to be made on where to turn to chase a better yield- rental properties perhaps?????
Wow, that's pretty interesting. Who really runs the show here, the Reserve Bank or the commercial banks? Especially interesting considering these major banks are all Australian owned.
I'm not really sure what to make of this. So ANZ & Westpac seem willing to risk profit margins (RBNZ might stay or rise after all even if unlikely) rather than wait til the official announcement. Hard to see this as anything other than them trying to pressure the RBNZ. I wonder what the state of the commercial banks books is?
This seems like quite a bold move and not one you would make lightly for a number of reasons.
The RBNZ set the rate of today’s money. When you fix for a term the bank (well really the market) decides where interest rates are heading over that term. Obviously the market has decided that the RBNZ is going to cut sometime soon.
I doubt floating rates will change until the OCR does.
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