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Westpac rate cuts; housing market to impact OCR?

Westpac has reacted to ANZ's rate cuts with a move of its own. The bank has cut 1 and 2 year fixed special rates in line with its rival. Compare and contrast here.

Could stronger-than-expected housing market data influence the Reserve Bank's thinking on the Official Cash Rate? [READ ON].

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House prices growing risk for banks – S&P

Skyrocketing house prices mean New Zealand banks are facing increased economic risks and will now have higher risk weights, a global ratings agency has said.

Tuesday, August 23rd 2016, 2:39PM

by Miriam Bell

Standard & Poors announced they have left their ratings of New Zealand banks unchanged – despite concerns about the country’s rampant housing market.

But strong house price inflation, coupled with an increase in private sector credit growth, has made for increased economic risks for the banks in the view of the ratings agency.

Standard & Poors analyst Nico DeLange said they believe the risk of a sharp correction in property prices has further increased.

“If it were to occur - with about 56% of registered banks' lending assets secured by residential home loans - the impact on banks would be amplified by the economy's external weaknesses, particularly its persistent current account deficits and high level of external debt).”

The increase in the economic risks facing the banks is contrary to the agency’s previous base-case expectation that the rise in New Zealand’s house prices would slow in 2016, he said.

The agency factored the macro-prudential tools initiated by the Reserve Bank, including the proposal to expand their scope, into their assessment of the banks.

DeLange said they consider these tools to have been only partly successful in limiting the pace of build-up of the risks facing the banks.

“In our opinion, structural constraints such as supply and demand imbalances and continued high migration levels will pose significant challenges to the effectiveness of macro prudential tools.”

For this reason, Standard & Poors will now apply higher risk weights for their loans in their capital analysis of the banks.

The agency said while there has been some weakening in the capital levels of all the banks, the stand-alone credit profiles (SACPs) of most of them will remain unchanged.

Exceptions were ASB Bank Ltd. and Rabobank New Zealand Ltd whose SACPs have weakened by one notch each.

ASB’s SACP has been revised to 'bbb+' from 'a-', which is on par with the SACP of New Zealand’s three other major banks, while Rabobank's SACP has been revised to 'bbb-' from 'bbb'.

However, DeLange said their ratings on ASB and Rabobank remain unchanged reflecting their assessment of timely financial support from their respective parents, if needed.

“The revisions of the SACPs of ASB Bank and Rabobank NZ stem from our view of increased risks across the banking system in New Zealand.

“We consider that no new significant bank-specific risks, such as any asset quality concerns, have emerged that drive these revisions.”

Tags: ASB banks Macro Prudential Tools RaboDirect RBNZ Reserve Bank S&P superannuation

« Expect OCR cut in November - economistsLooming LVRs impact on mortgage lending »

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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 4.15 3.99 4.39
ASB Bank Special - 3.65 3.49 3.89
BNZ - Classic - 3.65 3.49 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 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
Housing NZ Corp 5.19 4.15 4.09 4.39
HSBC Premier 5.24 3.35 3.35 3.35
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kiwibank 5.80 4.30 4.24 4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.49 3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.69 4.79 -
Resimac 4.50 4.86 3.89 3.94
Lender Flt 1yr 2yr 3yr
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.65 3.59 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 4.49 4.39 4.85
TSB Special 5.29 3.69 3.59 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.34 - - -
Westpac Special - ▼3.55 ▼3.45 3.99
Median 5.34 4.15 3.99 4.05

Last updated: 15 October 2019 3:57pm

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