More banks slash loan rates

Photo / Bloomberg news

ASB and HSBC follow TSB with fixed-rate specials as heat builds up in the housing market.

Two of New Zealand's biggest lenders have slashed mortgage interest rates, giving impetus to price rise expectations in the hot housing market.

ASB cut its five-year fixed interest rate special by 0.24 of a percentage point to 5.75 per cent and dropped its two-year fixed rate special by 0.06 of a percentage point to 5.39 per cent.

Vince Clark, ASB's head of home lending, said the fixed rate specials applied to customers with at least 20 per cent equity and who have their salary or wages credited to a main transaction account with ASB and one other ASB product.

HSBC reduced its fixed home loan rates across the board to a flat rate of 5.29 per cent for people borrowing $100,000 or more and Glen Tonks, head of retail banking and wealth management, said that was made possible by the current interest rate environment.

HSBC's five-year fixed home loan rates were dropped from the old standard rate of 6.49 per cent to 5.29 per cent and other terms were cut too.

Those bank moves follow TSB's new 10-year fixed 5.89 per cent mortgage rate announced last Friday when chief executive Kevin Murphy said there was a gap in the market for consumers looking for certainty around long-term interest rates.

A fall in wholesale interest rates - what banks pay to secure funding - is underpinning the lower mortgage rates. Massey University banking expert David Tripe said the 10-year wholesale swap rate, for example, had fallen from 4.7 per cent to 3.7 per cent between September 22 and Monday.

Factors such as quantitative easing - sometimes called money printing - in Japan and slowing economic growth in Europe were taking pressure off interest rates, Tripe said.

Westpac chief economist Dominick Stephens said a combination of low interest rates and population growth would drive the housing market on to new heights.

"Falling mortgage rates and strong population growth will stimulate the housing market. We forecast 7.5 per cent nationwide house price inflation this year, compared to 4.7 per cent in 2014," Stephens said, indicating there would be further mortgage interest rate cuts throughout the year. "Low inflation will prompt financial markets to push fixed mortgage rates even lower early this year," he said.

"Later this decade we anticipate an economic slowdown associated with the wind down of the Canterbury rebuild, slower population growth as New Zealanders return to a recovering Australian economy, and higher mortgage rates. Under such conditions we would expect house prices to fall," Stephens said.

Real estate agents said yesterday the end of the summer holidays and Aucklanders knuckling down at work could also push up activity.

Andre and Nikki Bodde of Barfoot & Thompson in Ponsonby said: "The last public holiday until Easter is behind us which means the property market is now back into its usual momentum. And it's already swinging this year.

"We're seeing a large number of attendees at open homes and the number of pre-auction offers are also increasing as purchasers realise they need to show their cards up front," they said. "It's all positive in the economic environment too. The Reserve Bank has indicated the OCR will remain steady, meaning low interest rates are expected for the remainder of the year. A stable economy and good employment prospects continue to buoy consumer confidence, which bodes well for 2015."

Additional reporting Christopher Adams