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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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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 4.94 - - -
AIA - Go Home Loans 7.49 ▼5.79 ▼5.49 ▼5.59
ANZ 7.39 6.39 6.19 6.19
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 5.79 5.59 5.59
ASB Bank 7.39 ▼5.79 ▼5.49 ▼5.59
ASB Better Homes Top Up - - - 1.00
Avanti Finance ▼7.90 - - -
Basecorp Finance ▼8.35 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.54 - - -
BNZ - Rapid Repay 7.54 - - -
BNZ - Std 7.44 ▼5.79 ▼5.59 5.69
BNZ - TotalMoney 7.54 - - -
CFML 321 Loans 6.20 - - -
CFML Home Loans 6.45 - - -
CFML Prime Loans 8.25 - - -
CFML Standard Loans 9.20 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 5.69 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 6.95 5.79 5.59 5.69
Co-operative Bank - Standard 6.95 6.29 6.09 6.19
Credit Union Auckland 7.70 - - -
First Credit Union Special - ▼5.99 ▼5.89 -
First Credit Union Standard ▼7.69 ▼6.69 ▼6.39 -
Heartland Bank - Online 6.99 ▼5.49 ▼5.39 ▼5.45
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.60 6.65 6.40 -
ICBC 7.49 ▼5.79 ▼5.59 5.59
Kainga Ora 8.39 7.05 6.59 6.49
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 7.25 6.89 6.59 6.49
Kiwibank - Offset 7.25 - - -
Kiwibank Special 7.25 5.99 5.69 5.69
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 7.94 ▼5.75 ▼5.99 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 7.49 6.95 6.29 6.29
SBS Bank Special - 6.15 5.69 5.69
SBS Construction lending for FHB - - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo 4.94 5.15 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.75 - - -
TSB Bank 8.19 6.49 ▼6.39 ▼6.39
TSB Special ▲8.64 ▲6.74 ▲6.49 ▲6.39
Unity 7.64 ▼5.79 ▼5.55 -
Unity First Home Buyer special - 5.49 - -
Wairarapa Building Society ▼7.70 ▼5.95 ▼5.75 -
Westpac 7.39 6.39 6.09 6.19
Westpac Choices Everyday 7.49 - - -
Westpac Offset 7.39 - - -
Lender Flt 1yr 2yr 3yr
Westpac Special - 5.79 5.49 5.59
Median 7.54 5.99 5.89 5.69

Last updated: 6 December 2024 9:11am

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