Major bank trims a longer term home loan rate as wholesale rate curve flattens, suggesting more longer term rates could fall

BNZ has kicked off the week with a home loan rate change.

They have cut their three year ‘special’ by -10 bps to 4.39%.

This matches the rate for that term offered by ASB, both now offering a market-leading rate for 3 years.

This change follows some changes announced by Westpac on Friday evening that are also effective today.

The sharpness of the current competitive instincts can be seen in the way that it is the major banks that are offering market-leading rates for two to five year terms, while it is the challenger banks offering market leading rates for the shorter terms.

Fixed term Market leading
rate %
offered by …
     
6 months 4.39 ICBC
1 year 4.10 HSBC
18 months 4.15 HSBC
2 years 4.15 Kiwibank and HSBC
3 years 4.39 ASB and 
4 years 4.59 ASB
5 years 4.79 ASB
7 years 5.55
10 years 5.75

Following Thursday’s Reserve Bank Official Cash Rate review, swap rates rose and flattened, although they had been fairly rangebound since the March OCR cut.

While the difference between the one and five year “best rates” above is +69 bps (that is, the difference between SBS Bank’s 4.10% and ASB’s 4.79%), it is worth pointing out that at the wholesale level today, the difference between the swap rates is just +16 bps (that is, the one year swap rate is 2.32% while the five year swap rate is 2.48%).

This would suggest there is some considerable room for mortgage market offers to fall at the longer end. We might see a five year rate approaching 4.4% or so. But that will depend on the competitive urges of some banks and their market share goals.

The other trend to look out for is banks changing their lending criteria, especially for investors, and even more especially for borrowers who rely on overseas income in their loan applications. BNZ, Westpac and ANZ have made separate moves along these lines.

See all banks’ carded, or advertised, home loan rates here.

below 80% LVR 6 mths  1 yr  18mth  2 yrs   3 yrs   5 yrs 
  % % % % % %
4.99 4.25 4.89 4.35 4.99 5.30
ASB 4.75 4.25 4.25 4.19 4.39 4.79
4.99 4.25 4.99 4.19 4.39 5.15
Kiwibank 4.75 4.29   4.15 4.49 4.99
Westpac 5.15 4.25 4.95 4.29 4.49 4.89
             
4.50 4.25 4.19 4.25 4.65 4.99
HSBC 4.85 4.19 4.19 4.19 4.49 4.99
HSBC 4.99 4.10 4.15 4.15 4.65 4.99
4.75 4.25 4.35 4.19 4.59 4.99

In addition, BNZ has a fixed seven year rate of 5.55%, while TSB Bank offers a fixed ten year rate at 5.75%.

Correction: An earlier version incorrectly noted the institutions with the market-leading 6 month rate and the 2 year rate.