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Reserve Bank proposals could force $2 billion mortgage hike: UBS

The Reserve Bank's new capital proposals could force Kiwis to pay $1.9 billion-$2.7 billion more for their mortgages each year, investment bank UBS has warned.

Friday, January 18th 2019, 9:45AM

Swiss investment giant UBS has taken aim at the proposals in a highly critical note. It believes New Zealand borrowers could be hit with rate hikes due to the costs associated with the new proposals, which were first mooted by the central bank last month. UBS believes banks will pass on the cost to home loan customers.

UBS estimates Kiwis could have to pay up to $2.7 billion more on their home loans each year to fund the capital requirements. It believes the rules could see rates jump by 80-125 basis points.

RBNZ, led by governor Adrian Orr (pictured), wants banks to keep an extra 20% to 60% on their balance sheets to guard against risk in the financial system. The capital rules, if implemented, would be the highest bank capital ratios in the developed world, UBS says.

UBS says it disagrees with the RBNZ conclusion that proposals "will only have a minor impact on borrowing rates for customers". UBS analysts believe New Zealand banks will "need to reprice their NZ mortgage book by [about] 80 basis points to about 125 basis points" to achieve the same return on equity.

UBS is highly critical of the RBNZ proposals and believes they could be "unnecessary and potentially damaging" to the country's financial system.

The bank adds: "We believe the RBNZ's endeavours to strengthen the banks could come at a significant cost  to  the  NZ  economy  as  they  appear  to  be  materially  underestimating  the  likely  mortgage repricing."

UBS also predicts the RBNZ move will hit Australian investors in the pocket. The need to hold extra cash in New Zealand could force the Australian owners of the NZ big four to cut their dividend payments to shareholders, the investment bank said.

The investment bank says the RBNZ proposals would be the toughest in the world, surpassing Norway as the strictest in the developed world. 

The RBNZ proposals are a long way from being implemented. The central bank has launched a five year consultation period on the changes.

Tags: RBNZ Reserve Bank

« Westpac back below 4%Kiwibank brings two year rate below 4% »

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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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