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Rates dropping while funding dries up

We have had the mother of all rate cuts recently, with the Reserve Bank slashing 100 basis points off its official cash rate. Thankfully many of the lenders have passed on much of this decrease to borrowers with reduced home loans.

Wednesday, October 29th 2008, 10:30AM
This has been particularly evident in the floating rate area where rates are down the full 100 points. It hasn't been quite so pronounced in the fixed rate market where cuts have been smaller.

This is all great news, especially to anyone refinancing an existing home loan at the moment. But there is a catch. That is, many of the lenders haven't got a lot of money to lend out at the moment due to the global financial crisis.

The crisis has pushed up the cost of money in the international markets where banks source some of their funding. The crisis has also made pricing volatile.

The upshot of this situation is that many of the non-bank lenders are no longer in the market. Of those that remain they aren't offering fixed rate loans in many of the common terms, such as two years. Meanwhile, banks have toughened their lending criteria, making it harder to get loans approved and there is talk in the market one major bank has "switched off the tap" and is no longer lending.

So while rates are getting down to numbers near their historical average, it's hard to actually get a loan.

The other development is that banks are breaking ranks and following different pricing strategies.

While we generally make comparisons among the big banks it is worth including two of the smaller banks at the moment; Kiwibank and TSB.

These two, which fund most of their loans from the domestic market, are leading competition in interest rates.

Kiwibank has set its floating rate at 8.70% which is significantly lower than the big banks which are all sitting at around the 9.45% mark and TSB is on 9.95%.

When it comes to the popular two-year term, Kiwibank and TSB are aggressively pricing their rates below the 8% barrier and as low as 7.78% when the borrower has a loan-to-value ratio of no more than 80%, while the big banks have two-year rates in the 8.20% to 8.30% band.

More rate cuts are predicted to come before Christmas so home loan rates should continue to fall.

To keep up with the changes and compare rates click on Mortgage Rates.

« BNZ's parent in hot seat to buy WizardOCR cut to 7.5% »

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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
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
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
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 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 ▼4.14 ▲4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▼3.39 ▲3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
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
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 15 November 2019 4:16pm

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