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Interest rate decisions not so easy now

Friday, July 2nd 2010, 6:35PM

by Philip Macalister

Ha. Just when everyone said that rising interest rates would kill the housing market banks cut their rates.

Kiwibank surprised me yesterday when it took its two-year fixed rate below the 7.00% mark. But what surprised me even more was that most of the other banks followed suit quickly and ANZ and National Banks went one further.


They decided to lower their three, four and five year fixed home loan rates and made major cuts – 74 basis points in one case.

I was surprised as Nigel Stirling at Radio New Zealand asked me earlier in the day whether the conditions were ripe for a mortgage rate war. My answer was no.

A number of factors seemed to suggest otherwise. Banks tend to compete in just one major area at a time. Currently the battle is for term deposits.

Secondly competition tends to be around the times when the housing market is running hot, or when there is good demand for business. Thirdly none of the banks have shown much interest in aggressively fighting for home loan business.

So what happened? One is that things have changed in offshore markets and wholesale money is becoming available at attractive rates. Secondly banks have some pretty big margins at the moment so they have room to move on their interest rates. The third, and a good sign, is maybe some of this conservatism we have seen recently is wearing off.

While there may not be obvious signs that competition is picking up there are some positive developments. One is that non-bank lender NZF is keen to take on the banks in the prime lending market.

The cuts to medium and long term rates do another thing. They change the equation around borrowing strategies. For those on floating rates it looked as though they would have to ride out this part of the cycle at the short end of the yield curve. With two year rates of 6.99% versus floating rates of around 6.00% and forecast to rise the equation becomes quite different.

This maybe one of those short term windows where borrowers can lock in an attractive rate to help them in a rising interest rate environment.

PS: Tonight Westpac has followed ANZ National and cut longer term rates and BNZ has made its changes. Details here
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Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 ▲4.05 4.49
ANZ Special - 3.55 ▲3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - ▼3.49 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 ▼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 4.80 4.95 -
HSBC Premier 5.24 3.54 3.54 3.69
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 - ▼3.39 3.45 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 - 3.39 3.45 3.99
Median 5.34 4.04 4.09 4.39

Last updated: 4 December 2019 9:11am

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