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Bank mortgage rates still at extreme levels

The Reserve Bank is expected to leave the Official Cash Rate at its current level of 5.75%, on Wednesday. The question is how will the major home lending banks, which already have high rates, respond.

Monday, August 12th 2002, 3:38AM

by Jenny Ruth

Most economists and the market expect the Reserve Bank will leave its Official Cash Rate (OCR) unchanged at 5.75% on Wednesday, largely because of the continued extreme weakness in global equity markets.

A Reuters poll conducted last Thursday showed 11 of the 13 economists surveyed expect no change.

The key question is: How the major home lending banks will respond?

Banks, generally, price their floating rates at between 150 and 200 basis points above the 90-day bank bill rate which is currently 5.86%.

All five of the major lenders are currently well above the extreme limit, National Bank the lowest at 7.95%, Bank of New Zealand at 7.99% and the other three at 8%.

Certainly, the government’s Kiwibank has seen an opportunity, slashing its floating rate from 7.10% to 6.95% even before the central bank’s decision. Chief executive Sam Knowles says his bank is following the market, given that the 90-day bills have fallen from 6.07% in mid-July.

David Tripe of Massey University says the major banks aren’t likely to move before Wednesday because they won’t want to be caught out if the Reserve Bank surprises the market with a rate rise.

While Kiwibank’s move "has an element of grandstanding," if there is no change in the OCR the major banks will be under pressure to lower their floating rates, he says.

"These rates are unrealistic. We should expect as a matter of course some rate reduction to occur next week," Tripe says.

Stephen Toplis, head of market economics at Bank of New Zealand, is one of the two expecting a rate rise next week, although he only rates the chances at 50%.

How the international equities markets and the New Zealand dollar perform over the next few days could swing the balance he says.

But he thinks the market is wrong to price in almost a zero probability of further rate rises this year. Among his reasons are that unemployment is at a 14-year low, consumer confidence is at an 11 year high, retail sales remain strong and inflation is still near the top of the Reserve Bank’s zero to 3% target.

« Mortgage borrowing continues to bloomRBNZ leaves OCR alone »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 14 March 2024 9:32am

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