Bank of New Zealand is promoting a 4.99% one-year, home loan rate through mortgage brokers for new business.
A secret “under the line” mortgage rate discounting war has erupted between banks as they struggle to hit home loan sales targets, says independent economist Tony Alexander.
“The banks are heavily discounting the one and two-year fixed rate behind closed doors,” Alexander says.
Alexander said one bank was offering 4.99% one-year rates for customers coming through brokers, but advertising a much higher rate to its existing customers.
Bank of New Zealand (BNZ) confirmed it had a limited time offer of 4.99% for one-year fixed-term home loans for “new” loans brought to it by mortgage brokers.
* Kiwibank and BNZ follow other major banks in lifting home loan rates
* Fears of interest rate hikes trigger homeowners to lock in longer-term rates
* Buyers of delayed new house builds risk losing deposits because of tougher lending laws, brokers claim
BNZ’s advertised one-year rate is 6.45%, and one-year fixed-rate home loans from its rival big banks range from 6.49% to 7.49% depending on how much equity borrowers have in their homes.
Alexander said another big bank was offering loan rates of 5.99% for 18 to 24-month periods, well below its advertised rates.
Home sales having fallen to levels not seen since the mid-1990s, and Alexander said banks were struggling to hit sales targets.
CoreLogic head of research Nick Goodall says the upcoming Consumer Price Index will have a big effect on interest rates and the rate of house price falls. (First published January 15, 2023)
“Banks are not meeting sales targets, so they are lending not at the advertised prices, but it’s behind-the-scenes stuff,” Alexander said.
Data from the Reserve Bank of New Zealand Te Pūtea Matua showed in December 2020, banks lent just over $9.6 billion in new home loans.
In December 2021 that had fallen to $7.9b. In December last year, it was just $5.1b.
Though it had not advertised the fact, BNZ said the 4.99% one-year rate was also available to existing BNZ customers who took out new home loans, and to borrowers who were new to the bank, even if they did not come through brokers.
Mortgage brokers are celebrating Westpac’s return to offering loans to first-home buyers with deposits as low as 10%.
Wellington mortgage broker Michael Anastasidis posted a celebratory video on Youtube about the Westpac move.
He said the bank was issuing pre-approvals for such loans which were valid for 60 days.
Mortgage adviser Campbell Hastie said the most encouraging thing about the Westpac offer was that it was open to non-Westpac customers.
Banks are limited by the Reserve Bank in how much low-equity lending they can do.
That had resulted in banks reserving new home loans for people with less than 20% deposits for their existing customers.
Hastie said he was getting more inquiries from first-time home buyers encouraged by lower house prices, and by the absence of investors in the market.
He said banks were willing to negotiate interest rates with people coming to the end of a fixed term portion of their home loans.
Many households with mortgages are facing higher repayments when they come to refix portions of their home loans as they come to the end of their fixed terms.