ANZ has upped the ante, launching an advertised cash back offer with its home loans.
The country's biggest bank is offering a $3,000 cash contribution for certain home loans taken out.
The cash contribution is only available on new home loans fully approved by December 2. They must be 'new' and for $200,000+ with new residential security provided.
And is conditional on you maintaining all your banking and home lending with ANZ for three years.
This expanded offer comes after ANZ joined two other banks offering fixed rates below 4%, also limited to loans taken out by December 2. Details of the lower interest rate offer are here.
At the same time, ANZ has cut its term deposit rates for terms of two, three and four years, although this is only a small trim of -5 basis points.
You can see what is behind these rate changes here.
Use our comprehensive mortgage calculator here to do proper impact comparisons.
And if you aren't exactly in the market today for one of these newly lower rates, you may wonder what the costs of breaking an existing contract would cost. You can estimate that here.
See all banks' carded, or advertised, home loan interest rates here.
Here is the full snapshot of the fixed-term rates on offer from the key retail banks.
| below 80% LVR | 6 mths | 1 yr | 18 mth | 2 yrs | 3 yrs | 4 yrs | 5 yrs |
| as at November 12, 2018 | % | % | % | % | % | % | % |
| ANZ | 4.99 | 3.95
 |
4.85 | 4.29
|
4.49 | 5.55 | 5.69 |
 |
4.95 | 4.19 | 4.15 | 4.29 | 4.39 | 4.95 | 5.09 |
 |
4.99 | 4.15 | 4.79 | 3.99
 |
4.49 | 5.19 | 5.39 |
 |
4.99 | 4.05 | 4.29
 |
4.49 | 4.99 | 5.09 | |
 |
4.99 | 4.19 | 4.15 | 4.29 | 4.49 | 5.29 | 4.99 |
 |
4.50 | 4.19 | 4.29 | 4.35 | 4.49 | 4.99 | 5.15 |
 |
4.85 | 3.85 | 3.85 | 4.19 | 4.69 | 4.99 | 5.29 |
 |
4.99 | 4.19 | 4.49 | 3.95 | 4.49 | 4.89 | 4.89 |
 |
4.85 | 4.05 | 4.19 | 4.19 | 4.49 | 4.95 | 4.99 |
In addition to the above table, BNZ has a fixed seven year rate of 5.95%.
And TSB still has a 10-year fixed rate of 6.20%.
71 Comments
Lending conditions are tighter and there is competition for the new mortgages. Most people will stay with their bank due to the effort of switching banks. It looks like this is the only way they can aggressively increase their mortgage book.
Wholesale rates may be going up bank most of the lending to NZ banks is by depositors and they are getting shafted with low rates.
I wouldn't overstate the extra amount to be refinanced. 'Normal' is about $15 bln per month, but in the Oct to Dec period it rises to about $20 bln/mth. Remember, this is a $257 bln book, of which $207 bln is fixed. And of that, $146 bln is for owner-occupiers, so the added $5 bln is only an extra 3% loading. In addition, the investor market doesn't really show much seasonal peak, with about $12 - $14 bln resetting each month over the whole year.
But that extra $5 bln/mth over these tree months is worth going after. In ANZ's case of course, they have the most to lose, being the biggest.
In very simple terms, without takers, there is a very real risk that mortgage defaults will rise.
The general populous aren't stupid and know that house prices are extraordinarily high.
Low low interest rates are only one piece of the puzzle. Ultimately debt needs to be paid back.
Coupled with this, by in large NZ builds very poor quality houses by international standards.
Got to keep the ponzi going. They are desperate to keep credit growth and profits growing. When the ponzi collapses they'll be ankle deep in it.
Bryan Gaynor takes a look at the $5128 million after tax annual profit the Aussie owned banks have just sucked out of New Zealand. This is just one third of the combined net earnings of the 10 largest NZX listed companies!
This is the nonsense you get when you allow banks to create credit at a keystroke, a tax environment favoring property speculation, a populous obsessed by property, a light handed regulatory regime and government rental subsidies to landlords.
Ultimately this nonsense will end but it's grown into such a monster there's going to be a lot of pain when it does.
That is plain wrong about banks "creating credit at a keystroke'. A popular myth about how it works. You can see the proper explanation here. Yes, the banking system creates 'credit', but no one bank just aribitarily decides to make stuff up. They would go bust (quickly) if they tried it in the capricous way you imply.
Dear “independent- observer”
IF you’re going to critique David you’d best learn the correct English & use TOO instead of TO
I do agree however that the banks are more likely to receive help from the taxpayers than any mortgage holders ever will. Witness the US experience after GFC which resulted in saving banks & kicking out mortgage holders from their homes Many of them had been paying their mortgages dutifully for 20 years !
The mighty rule in this world not the individual
@David The article you link to is also wrong/incomplete. Banks can make a loan without a deposit because the loan becomes a deposit someplace and they borrow it back overnight, or they borrow from the overnight window of the reserve. Its explained here by the BOE:
From the BOE:
The reality of how money is created today differs from the
description found in some economics textbooks:
• Rather than banks receiving deposits when households
save and then lending them out, bank lending creates
deposits.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/20…
The RBNZ and BOE have use same basic banking mechanics. The BOE also requires deposit to loan ratios. The point the BOE is making is that the loan is a deposit either at the same bank or a different bank. The issuing bank then borrows that money back overnight from other banks to shore up its ratio. Ultimately lending in NZ and the UK is limited by demand and capital adequacy ratios, it is not limited by deposits.
As to your point on borrowing overnight to fund fixed assets: Banks fund using pools, they do not directly match fixed liability periods to fixed asset periods. It is standard for banks to borrow slightly short and lend long. What do you think 30 day rolling term deposits are funding :-)
The OCR by design is a no limit window to insure it can effect the curve beyond the variable rate as arbitrage will occur between the OCR and short dated loans if the gap is too large.
Thus the OCR's effect lessons with fixed period but is not solely limited to variable rates.
to be fair, it’s pretty close to being true. All the banks need is a little in reserve and a promissory agreement from a borrower to pay from their future labour which the bank monetises. Then then create (through keystrokes) a deposit and away we go.
Yes, in a nutshell and nail on head.
David Chaston
IF banks are as you say then they should be able and willing to cover my and others bank deposits and not rely on attacking our savings via a “haircut” should the government under Jacinda & Winston continue to allow it like John Key & Bill English did
There are no savings protections in NZ banks for deposited funds
Australia 250K Canadav100K all per account in different banks NZ banks offer 0 protection on deposits
@Withay thats incorrect, they do not need money in reserve to issue loan, David is just wrong on this.
From the BOE:
The reality of how money is created today differs from the
description found in some economics textbooks:
• Rather than banks receiving deposits when households
save and then lending them out, bank lending creates
deposits.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/20…
The banking system is whatever it takes to keep the ball rolling or the tin can kicked down the road
That’s the world banking system
It’s also a falsehood to even use the word banking anymore
It’s a world ponzi-scheme and that’s a fact we will again discover in GFC2
How many giant bubbles of debt exist in NZ today ? Student Loans Debt / Auckland City Debt / Consumer Credit Debt / House MorgagevDebt / ChCh EarhquakebDebt /
Best get Fonterrra up & running better or discover much oil gas lithium & gold quick because there is no cushion left
Prof Richard Werner on Banks
https://www.youtube.com/watch?v=EC0G7pY4wRE&t=265s
"Mitchell has it in for mainstream academic economics. Quite probably there is something in what he says about that. Between the sort of internal incentives (“groupthink”) that shape any discipline, and the inevitable simplifications that teaching and textbooks require, it seems highly likely there is room for improvement. If textbooks are, for example, really still teaching the money multiplier as the dominant approach to money, so much the worse for them. But as I pointed out to him, that was his problem (as an academic working among academics): I wasn’t aware of any floating exchange rate central banks that worked on any basis other than that, for the banking system as a whole, credit and deposits are created simultaneously. He quoted the Bank of England to that effect: I matched him with the Reserve Bank of New Zealand."
https://www.interest.co.nz/opinion/89055/former-rbnz-economist-michael-…
David. Your referenced RBNZ paper is only correct if money is transacted by cash (notes) only, and would only be a useful model if LVR limits were at 50% (rather than the current RBNZ LVR limit setting of 80%).
Surely the RBNZ would not still be representing this "fractional reserve" model of the current system as being useful: - if it does then NZ is in serious trouble. Various central banks have already acknowledged that the "fractional reserve" model is not adequate, and seriously underestimates the system risk by the money creation capability of private banks.
Various other central banks (UK, Germany, Norway) have more realistic papers on the subject. For example, here is a quote from the Norwegian central bank on the topic:
“When you borrow from a bank, the bank credits your bank account. The deposit – the money – is created by the bank the moment it issues the loan. The bank does not transfer the money from someone else’s bank account or from a vault full of money. The money lent to you by the bank has been created by the bank itself – out of nothing”.
David, but the banking system, made up of individual banks, does create credit at a keystroke as others have pointed out. In the modern monetary system credit then flows through the system as "money"- it's indistinguishable. The Bank of England has a very good explanation.
@David The article you link to is also wrong/incomplete. Banks can make a loan without a deposit because the loan becomes a deposit someplace and they borrow it back overnight, or they borrow from the overnight window of the reserve. Its explained here by the BOE:
From the BOE:
The reality of how money is created today differs from the
description found in some economics textbooks:
• Rather than banks receiving deposits when households
save and then lending them out, bank lending creates
deposits.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/20…
I presume you mean fixed interest rate terms (typically 12-60 months) as opposed to mortgage terms (20-30yrs) . If everyone needed to take an Interest rates of over 10 years, the rates would be >7-10% due to swap costs and very little 10 year retail deposits out there. Not sure that's a good outcome.
Why this constant criticism of the banks? They operate to make a profit like most businesses (those that survive anyway) and on terms that meet NZ laws. The real culprit in setting the direction of NZ's unhealthy focus on residential ownership and investment is the NZ reserve bank. They decide, using the Basel capital adequacy rules, where the banks can make the most profit. Residential requires the least capital and the shorter the loan term the lower the bank's capital needs per total dollar lent. An example - in 2011 the RBNZ decided the banks were too exposed to farm lending so changed the capital ratios and the bank responded by lifting their lending margins, reducing the length of the loans and focusing on other areas of lending. They could take the pressure off residential by doing the same.
The messed up this about saying that 'banks are just another business trying to make a profit' is that most business products/services are optional for the general citizen/consumer. I.e. you only buy a product/service if you want to.
The way our society is structured, is that unless Mum and Dad buy your house for you, then you have no choice but to use a banks products/services (i.e. you have to get a mortgage and become a slave to the bank). There are no other businesses in this position of absolute power. And regardless of conditions they appear to make a profit and if they don't make a profit and get into trouble, then the tax paying citizen then has to bail them out. Does this not seem outrageous to you? They can't lose. It is the ultimate business model. Everyone has to use your business products, without choice, and if you as a bank leader/manager stretch the margines too far and the balance sheet gets out of wack then the same people who are paying you on a daily basis for your business products, then have to pay more to bail you out via the government/tax take...
I O - the point I was making is that reading some of the comments on this site you would think banks are demonic in their behaviour. They are not - they are just operating according to the rules our government and by proxy us the public sets them. If we want their behaviour to change - change the rules, it is in our power collectively to do so. A while back Shane Jones was saying banks have a social obligation to support the provincial areas by keeping branches open. Where was the the public support? Answer - Nowhere. Apathy gets its own results. And I pay way more than my share of the banks annual profits so no love lost here. Just believe we are bitching about the wrong culprit.
Just wait until the property markets crashes and/or we enter recession. While the going is good the people are selectively ignorant to the perils of their prosperity. When they start hurting, they'll want the bank CEO heads to roll and perhaps only then any consideration to changes the rules that our banks operate under.....capitalism is really bringing out some darkside traits of human behaviour. Perhaps not that different to slavery of hundreds of years ago...just in a different form and not race based.
I O. I’m with you with almost everything that you’ve said except the capitalism part. Capitalism is “an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.” The issue here however is money creation. It is neither inherantly left or right wing, capitalistic or socialistic. It is cronyism.
So if its not capitalistic or socialist, then we'd never privitise profits but social loses would we? So lets say one of our big banks fails in the next few years, I take there's no expectation for society to bail them out given they like to privitise profits? That wouldn't be a social responsibility would it? If you want to eat your cake, you should eat your cake I say..
I think our banks operate under a capitlistic model when it suits them....and then don't when it suits them...
Hi Wilco, I think I can clarify why the hate for the banks (especially from my point of view). As you’ve mentioned, it is the rules. When a bank creates a loan they are monetising your promise to pay with your future labour. In short, the banks provide nothing other than the creation of money which they then charge interest on. All the while, they own the house which was bought with your future labour. In NZ’s case they then transfer wealth for which they have done next to nothing for overseas or to their shareholders.
We need a rule change but there is such a lack of understanding it most likely won’t happen. We are stuck in an unfair, destructive system which won’t be changed in the foreseeable future hence the hate for the banks.
Monumental lack of understanding.
People like me deposit money in a bank. It becomes a liability on their balance sheet with an agreed repayment structure e.g. at call. The bank then lends that money e.g. to a house buyer. That is an asset on their balance sheet. In return for obtaining that loan the borrower gives a mortgage over their property. The bank doesn't own the property, its saleable security in the event the borrower defaults. The bank makes money by intermediating and taking on the borrower credit risk, paid for by a margin. The bank holds capital to cover the possible losses if the borrower defaults and the security sale doesn't cover the loan. The bank also takes on liquidity risk by lending long and borrowing short.
Why is this so hard to understand? Personally, I'm astounded that they can take my deposits at the rates that they do and still make money lending it. I wouldn't take credit risk for such a small risk premium.
Hi Ex Expat. It's so hard to understand because it's not correct. You made the same comment on another thread to which you were replied to but I don't think you have seen it:
https://www.interest.co.nz/opinion/96730/jen%C3%A9e-tibshraeny-question…
And here's a good link from that comment section provided by Nic Johnson describing how credit is created:
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creati…
In short, the banks are not intermediaries. They do not really loan the money that is deposited with them, they use it to build their reserve requirement along with wholesale funding. This also debunks your comment about "taking your deposits at the rate they do." That deposit then enables them to create 9 ish times that amount of credit from nothing, that's why they take it and pay what they do.
If you still have a counter arguement after viewing the above, please put it forward with evidence as I would be interested to see it.
Assuming you are able to read a set of financials this is a good example of what I'm talking about
https://www.westpac.co.nz/assets/Who-we-are/About-Westpac-NZ/Disclosure…
Thanks Andrew. Key line from article - "One neglected detail is the banks' function as the creators and allocators of about 97% of the money supply (Werner, 1997, Werner, 2005), which has recently attracted attention (Bank of England, 2014a, Bank of England, 2014b, Werner, 2014b, Werner, 2014c)."
Hi Ex Expat, I appreciate the responce. Pardon my ignorance but what eactly are you trying to show/point to with the disclosure statement?
If your trying to support your comment that: "People like me deposit money in a bank. It becomes a liability on their balance sheet with an agreed repayment structure e.g. at call. The bank then lends that money e.g. to a house buyer. That is an asset on their balance sheet." I would point you in the direction of an interest.co.nz page, specifically:
https://www.interest.co.nz/charts/credit/money-supply - This shows the increase of the M0, M1, M2 and M3 money supply. If Banks took your deposits and loaned them out no money would be created however if you look at the M3 money supply you will see it has increased from $42,171,000,000 in 1988 to $322,011,000,000 in 2016. How could this happen if loans were made with money from depositors like yourself?
And on our own RBNZ website:
https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulleti…
https://www.rbnz.govt.nz/research-and-publications/videos/money-creatio…
A bank releasing a disclosure statement that accounts for their liabilities with assets is not the same as loaning money from depositors. I hope the M3 data alone shows this is not how it happens.
Withay
Of course Banks are intermediaries... They both take deposits and create credit ( make deposits )
They aggregate short term deposits and extend longer term loans...etc..
They are also the transactional life blood of an economy ( payments system ). Transactional accts. are a big deal.... etc
To argue that Banks only take deposits to build reserve requirements is painting a wrong picture in my view.
Credit is a claim on money... Credit is an IOU . ( Central Bank academia uses the terms inside/outside money )
Whether a Bank has the money to honour the IOU , intitially or later is not really consequential.
What is critical is that there is enuf liquidity ( money ) in the system to keep the game going, ...to pay out people who cash in their IOU chips...so to speak. ( Banks settle thru the payment system , each day )
In order to maintain liquidity Banks must have adequate reserves..( irrespective of regulatory requirements )
https://www.rbnz.govt.nz/regulation-and-supervision/banks/prudential-re…
It really is a form of alchemy .. that Bank credit, an IOU , can become money .... and yet still be an IOU
When the shit hits the fan , these IOUs' would have no value when/if too many people wanted to cash them in...and Banks became insolvent . ( Only the goodwill of the Central Bank would save us )...
Hi Roelof. Yes I am happy to cop to being incorrect in saying that banks are not intermediaries as it is not technically true. What I should have said is that being intermediaries is now a very, very small part of how banks operate.
Aside from that, I think we're saying the same things in different ways.
Hi Withay... yes I think we are essentially in agreement.
I tend to come from the point of view that shows a Banks ability to create credit has natural constraints.
eg... lots of people think the whole credit creation process is without constraint....
They think that because the Banks can create money(credit) out of thin air, then Banks cannot have solvency/liquidity issues and dont understand a banks need to borrow money.....etc
cheers
Hi Roelof, The natural constraints would be the capital reserve requirements and the current debt servicing abilty of the borrower? The thing which worries me is, someone's debt is soemone elses income. This helps perpetuate the cycle. Money is created to purchase a house, that money then gets deposited by the seller, the deposit gives the bank more reserves which enables more money to be created... For example
Banks can definately have solvency/liquidity issues. Where the counter arguement comes from is that (as per the US and Europe) central banks then create money and bailout the commercial banks. So I agree that commercial banks can't create money to bail themselves out but the central bank can unfortunately.
Withay... The biggest natural constraint is prudence. ( In the same way you and I dont leverage excessively , in our endeavours )
Yes.. one mans spending is another mans income. Thats the way it is... The excesses will get sorted out at some point.... and we will have a reset.( of some kind ).. If we have wise astute leaders then the pain will be transitory. IF not ...and the entrenched system tries to survive..there will be civil unrest and prolonged suffering.
My biggest issue with Bank created credit growth is that I believe it is the underlying cause of the growing wealth inequality.
An irony is that much of the innovation/productivity gains of the last 60 yrs has been on the back of the Capital Formation resulting from excessive credit growth...
Are u familiar with the writings of Ray Dalio..??
http://www.economicprinciples.org/
Hi Roelof. I’m a big Dalio fan. “How the economic machine works” was partly what kicked off my curiosity.
We’re singing from the same song sheet. Money creation does create inequality along with multiple other negatives. I would contest however, that it wasn’t the cause of our innovation as it has taken money from productive ventures and directed it to speculation. I think we could be further ahead technologically with sound money.
I'd add that I have a different view to intermediation to you.
My view is that there is a very high level of intermediation and interconnectedness .... which has facilitated the credit creation process.. The Banking system is utterly entwined in the economic process. The modern transaction/payment system is an incredible, intermediary thing. It has given the Banks a "steroid" like boost to its ability to create credit.
I'm curious to know why u feel intermediation is very , very small.??
Hi Roelof, I totally agree with the level of interconnectedness. In many ways the banking system is the economic process now (in my opinion).
The intermediation for me is between depositors and borrowers and actually, I just watched a video linked by Andrewj that confirmed what I first said:
https://www.youtube.com/watch?v=EC0G7pY4wRE&t=265s
My key takeaway - Banks don't make loans, they buy securities. You offer your future labour via a promisary security that the bank buys. That is the mechanism through which money appears in our account when we "borrow" to purchase an asset. Therefore, no connection between depositor and borrower.
I think you are playing with words when u say banks dont make loans, they buy securities.
The best map is the one that is simple and aligns with reality...
In NZ Banks qualify borrowers and give loans.
Borrowers agree to pay the loan back and pay interest..
Whether it is from future labour ( income ) or from an inheritance or a sugar Daddy is incidental.....
Whether the loan is from deposits or from credit creationthat creates deposits is incidental.. ( for the sake of this argument )
For me money is defined by its 3 qualities:
medium of exchange
Unit of account
Store of value.
Saying that it is a claim on "future labour" , complicates and muddies the water...in my view.
All the Bank needs is the assurance that the borrower is "creditworthy"..
The connection between borrower and lender ( depositors ) ...is the Bank.. ( and it is opaque ).
My mother has her life savings with the bank earning 3%.
I'm sure the bank lends that money to a borrower and leverages it thru credit creation.
Deposits...loans... credit creation as a deposit is all intermingled .. into a fungible brew..
Impossible to discern the dynamics , without going back to the first principles of how the Banking system evolved , from the early goldsmith days...etc. in my view.
Using balance sheet accounting principles to understand , without understanding the underlying first principles, .gives an incomplete picture.. in my view.
As both our scenarios give the same outcome I’m happy to focus and agree on that.
Regarding monies characteristics, it’s failing the “store of value” criteria hence why it’s correctly referred to as currency.
Here’s a great video ripped off from Andrewj that explains banking extremely well:
https://www.youtube.com/watch?v=EC0G7pY4wRE&t=265s
Redcows - I am not saying the banks are not culpable for some of their excesses. I had friends who lost their farms and their life savings under Rogernomics and the banks pulling their support. I am saying that the only way to achieve change is to understand who or what is responsible ( in this case the RBNZ ) and agitate for change. Bitching about the trading banks won't achieve anything.
Govt bond yields have also seriously spiked the last few weeks. I note that the Australian banks have been asked to raise their capital levels again, as they are low compared to international peers. Has anyone looked at how well capitalised the NZ banks are? Especially important considering there is no Govt depositor guarantee here. As Kevin Rudd's new book confirmed, 3 Australian banks (one of them 1 of the Big 4) were within a whisker of collapsing in the GFC before the Govt intervened - what happens when they have their own homegrown crisis?
Cash backs often have strings attached. BNZ offered me $3k with a 4 year pro-rata claw back. Effectively I can kiss goodbye to half of that if I take a 2 year loan. Unfortunately the rubber stamp lawyers and valuers are killing our negotiating power as it's very costly to switch especially for those with smaller mortgates.
I would not take $3'000 for having to stay with the same bank for 3 years, I fix for 1 year then the rate comes up for review and I have no negotiating power at all as I can't change banks when the fixed rate reverts to floating. But I guess it depends on the size of the loan
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