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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
ANZ 5.19 3.95 4.15 4.49
ANZ Special - 3.45 3.65 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
Bluestone 4.44 4.44 4.29 4.34
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
Lender Flt 1yr 2yr 3yr
China Construction Bank Special - 3.19 3.19 3.19
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.65 4.80 -
HSBC Premier 5.24 3.54 3.20 3.69
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Lender Flt 1yr 2yr 3yr
Pepper Money Near Prime 5.64 - 5.44 5.44
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
Lender Flt 1yr 2yr 3yr
TSB Bank 6.09 4.19 4.35 4.69
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society 5.50 3.95 4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.96 4.09 4.39

Last updated: 21 February 2020 4:32pm

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