ASB has cut its advertised fixed-term mortgage rates for one, two and three years in the latest move in a round of fixed-term rate cuts by the major banks.
ASB says its cuts, effective from tomorrow Tuesday May 15, see its one-year rate cut 45 basis points to 5.25% per annum, its two-year rate cut 30 basis points to 5.55%, and its three-year rate cut 35 basis points to 5.75%. At 5.75%, the three-year fixed rate is the same as ASB's advertised floating, or variable, rate with its one and two year fixed-term rates below the floating rate.
The cuts follow some to fixed-term rates by ASB's rivals ANZ, the National Bank, BNZ, Westpac, plus SBS Bank and TSB Bank last week and over the weekend since state owned Kiwibank introduced a 4.99% one-year "limited time, special" offer on April 26. Kiwibank says the special has been its most successful since it started offering limited time specials, that generally run for three weeks, early last year with NZ$110 million lent through the offer thus far, with half of this coming through winning customers' over from rival banks.
Despite the fixed-term rate cuts following recent falls in the swap, or wholesale, rates banks use for their own funding, the banks haven't dropped their floating, or variable, rates which the majority of mortgage customers are currently on.
“Changes in market conditions have meant that the cost to ASB of funding some of our fixed home loans has reduced, so we are directly passing on these savings to our customers,” said Shaun Drylie, ASB's general manager for products, retail and business banking strategy.
ASB's new one-year rate brings it in line with those offered by sister banks ANZ and National, plus Westpac. However, it lags the 5.20% rate advertised by TSB. BNZ has introduced a new 5.10% "classic" 18 month rate. Both ASB's new two-year and three-year rates are the lowest standard rates advertised for those time periods by a bank.
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19 Comments
Tempting, tempting, temptation .... those fixed rates are looking tempting. But do you really want to lose your flexibility to change banks or fix quickly for longer if rates move up.
But maybe the entire economic system is on the verge of global collapse, in which case the banks won't be able give money away at 3%. So float into the meltdown (Stevens' scenario).
When will the floating rates move down as they should? They want to move some of those 60% floating to fixed for a reason & it ain't margins.
The assets that those mortgages are based on can only keep their value if rates fall to prop the whole package up. Good for borrowers.... while they have a job/income.
You lost your flexibility the moment you got a mortgage, Mr Belt. Your constant posts glorifying mortgages is an attempt to drag everybody down to the lowest common denominator. i.e In debt, lack of capital to begin a productive enterprise and constantly worrying what some "Bank" will do. NZ needs less residential property borrowers, not more.
Pretty much, yes.........except Im not so sure on the Banks funding getting cheaper, it should but it might actually get impossible though hopefully for a short time only as money flees to safety ie USD. "Tempting" yes so I think this week Im going to fix for a year.....its not much $ either way in my case....a few K at most....its peace of mind / bufer in case of insanity.
Floating to fixed, yep I think its a sign that they want to reduce leverage. Or I wonder if they have got some lump sums in those senior debt units that are now allowed....but have to have a decent % of the borrowers with high equity....If its to reduce leverage then we might see some very low rates attracting ppl with say 50% max to borrow....
In the longer time frame (year or two) If its a depression and prices decline thats good for those who have saved and are living off it, also those who keep their jobs....at least thats how the Great Depression went. The problem will be the % that lose their jobs both in paying the mortgage / rent and the knock on effects....landlords might find that their tenants cant pay....in 1990s in the UK the Irish went back to Ireland...Im sure we have some % of work permits here who could end up on a flight home as work dries up..........it all adds up when it starts to go bad......
regards
There has been so much chatter here that interest rates will soon rise and not too long ago predictions Reserve Bank will increase OCR, however can we now all simply accept that the OCR will soon be 2% and that floating and fixed mortgage rates will constantly decline for the next two years as swap rates plummet and housing will become more affordable than any time in the last 10 years.
Some chatter on rises but 2 camps here, many such as myself said no, drops or static, The "market" finally is coming around to that, but I think its now moving on, they are behind the curve I suspect. My reasoning is thats the OCR, not the rate that banks get funding at and that is, or will be the problem. For the OCR to go to 2% (and it will i agree) it will imply we are well into a serious recession or depression not seen since the Great Depression with resultant climbing un-employment and collapsing Govn revenue. My worry is that we will see an [il-]logical flight to safety and that is the USD, bye bye NZ funding. So the NZD will drop back and badly and while the OCR will be rock bottom attracting foreign lenders I think (maybe only a short period ) be very hard....high un-employment will make the housing bubble deflate if not pop IMHO.
regards
Steven, my view, if its a banking collapse or the alike in europe that triggers a 2% or lower OCR (rather than the RBNZ with a currency concern), then bank funding spreads will blow out substantially and we wont see any real downside in rates at all - if that occurs watch the money printing kick back into even higher gear globally, and then couple that with the resulting lower NZ dollar, inflation will start to appear on the horizon irrespective as to how bad the economies are performing - 1970's style but for a different reason. The floaters won't be quick enough
NZ Heads, do you truly think any banks tries to trick people into fixing because they think its going down ? Truly, do you really think that ?
Not what I asked, I asked do you think economists deliberately try to trap people into fixing when they think its going lower ? Do you really think that they would very publically make such predicttions thinking differently, or perhaps do you think it may just be a case of them getting their forecasts wrong in the past 2-3 years ?
I guess when we blog there are some things we all know alot about, and other things we perhaps have a more uninformed opinion on, but the joy of blogging is that you always find a few others who do know the facts in the areas where we are weaker. For all your words, let me clarify the answer to the question I asked as your'e clearly someone not informed on the question I asked you about - economists do not deliberately misinform, they just get it wrong sometimes, that is the facts
You raise another issue as to where rates should sit - bearing in mind that the OCR curently sits are 2.50% and bank bills at 2.80% above that (totally irrevalant because banks can't raise funds at that level), and that banks cost of funds is around 1.50% above that, you are suggesting that banks could operate their businesses on about a 5 basis point margin (0.05%) - you are obviously incorrect. And another point, if you compare what banks are charging as a total margin above the wholesale yield curve, their floating margin is actually slightly lower currently than fixed rates (2.8% against 3%ish)
So what I'd suggest Heads is that you get rid of the conspiracy theory you have because it may be distarcting you in understanding what really drives rates - base wholesale rates, funding spreads and competition.
I tend to disagree. Economists are portrayed (including by themselves) -whether rightly or wrongly - as qualified professionals who base their analysis and predictions on sound empirical analysis. By claiming that their predictions are to a large extent an "Article of faith" flies in the face of this image. As an engineer if my analysis and predictions were as wrong as economists then I would be sued many times over and out of work for life.
Their models are obviously seriously flawed. Read "The Black Swan".
The probelm is not they are sometimes wrong. The problem is the frequency with which they are signifciantly wrong. Personally, they are significantly wrong so often that I can't give the profession any respect what so ever
Mind you it's good Tony's showing some humility, and in recent times is pretty much throwing his hands in the air and admitting he doesn't know what is happening at the moment - that's a good answer, because that's the truth. After all, he did slam Bernard on his house price predictions. His predictions haven't been too bad mind you. Westpac have been shockers, consistently very wrong on GDP, unemployment and interest rates. And don't get me started on Treasury! Or how about Infometric's clanger of a house price prediction 2 or 3 years ago?
Agree....also as an engineer there is a more direct link to failure. Ppl can and do die, if you had ever been in front of the health and safety executive, well they go through your designs, maintenance schedules, training and competance to make sure you are not to blame. Then maybe they would understand just how gob smacked I am on how bad and how incompetent, politisised and blinkered many economists seem....
NB GrantA is a gold and inflation bull I believe, same un-shakable belief, same school of economics outlook.......but given Greece and JPMorgan's losses fixing for a year actually makes some sense to avoid short term termoil/spikes IMHO......think I will this week.
regards
Yet of course you are an inflationista....so refuse to consider my point of view as a deflationista.....
;]
The economic trend is a recession/depression and deflation...what might happen as we meet the inflection point however is material......so fixing to avoid that makes some sense.......at least I cant see a downside...except maybe lose a few $s.
regards
Nz Herald this morning has ASB cleverly manipulating the peasants fear by warning how house prices are increasing therefore Bollard wont,t drop OCR, or may increase. Then asks the fear question "could you pay your loan if rates went up 3%."? Yeah right. We can all envisage floating at 9%.
If Bank Economists wanted to be honest they would say: Yes, we admit the NZ economy is pretty sick, our graduates cant get jobs, our lending is down, looks like rates will be lower for longe"r. IF they keep threatening hikes then no wonder they can,t lend out their money.
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