Table below updated with changes from Westpac.
ANZ not only it raised its variable rates for home loans following last week’s 75 basis point increase in the Reserve Bank’s (RBNZ) Official Cash Rate (OCR). It’s also raising all of its flat rates.
The bank noted that its rates are being revised “in response to international and local market conditions.” Local influences are essentially driven in the short term, a year and less, by the parameters of RBNZ policy. International influences are much stronger on rates for two years and beyond.
And these international influences are clearly driving down wholesale prices.
So why is ANZ pushing longer rates higher?
ANZ says; “With the OCR change and the expectation that OCR will now need to increase next year, there have also been changes in wholesale rates that have impacted fixed interest rates for home loans. »
But a quick check of the swap rate charts below might make you question that statement. Maybe you can attribute an increase to that, but 55 basis points? or even 35 basis points? Hard to see.
Two-year swap rates are now more than 10 basis points below their October levels. Three-year swap rates are more than 30 basis points lower. And five-year rates are 50 basis points lower. But ANZ has now raised fixed mortgage rates by 55 basis points or 35 basis points. This opens up a pretty clear difference that isn’t driven by wholesale pricing, but still.
ANZ seems aware that these rapidly rising rates will hurt. A spokesman said the bank had proactively reached out to customers who showed signs of needing reassurance or support and encouraged anyone concerned to get in touch. “People shouldn’t be nervous talking to their bank, we are here to help customers with the various options available to them,” she said.
ANZ may need to look at what rivals are up to now. Most of them would have to line up to take advantage of the building leeway granted by ANZ.
But some may see an opportunity to grab market share when swings are so large.
Between ANZ and (say) BNZ, there is a 65 basis point difference in favor of BNZ for a two year fixed mortgage. Over three years, that’s a 59 basis point lead. Over five years, that’s a 135 basis point lead that a borrower can keep by not choosing ANZ. These variations are currently too large to ignore.
We are not saying they will last. They could disappear quickly. But if they disappear, it won’t be because of wholesale price pressure.
Indeed, five-year fixed rates may now be lower than two-year fixed rates. It’s not unprecedented.
Since such large variations are uncharacteristic, the possibility of one or two banks testing what they will do to borrower behavior to achieve meaningful change could be appealing. ANZ managed to push through aggressive rate hikes, only to have to reverse them because no one else followed suit. It’s rare to be honest, but it’s happened many times.
And with surging volumes driven by the mortgage brokerage business, it’s unlikely ANZ would simply wish the trend would end. Brokers will be much more careful about this than casual, independent borrowers who can only speak to a bank mortgage servicer.
A helpful way to make sense of your adjusted home loan rates is to use ours complete mortgage calculator which is also below. (Term deposit rates can be estimated using this calculator).
And if you already have a term loan that is not being renewed right now, our break cost calculator it can help you weigh your options. But downtime expenses should be minimal in a growing market.
Here is the updated snapshot of the lowest advertised term mortgage rates currently offered by major retail banks.
Select chart tabs
2 years % 6 months % 1 year % 3 years % 4 years % 5 years %
Select chart tabs
1 year % 2 years % 3 years % 4 years % 5 years % 7 years % 10 years %
Comprehensive mortgage calculator
Source: www.interest.co.nz
