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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, 10:35AM

by The Landlord

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 go to www.goodreturns.co.nz and click on Mortgages.


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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
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 - 7.14 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 7.74 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 - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 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 6.89 6.55 6.35
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 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.09 6.95
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.84 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.24 6.75 6.39
Median 8.64 7.19 7.17 6.65

Last updated: 20 June 2024 10:39am

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