TSB has announced the lowest two-year mortgage rate on offer by banks in New Zealand. Photo / NZH
TSB has announced the lowest two-year mortgage rate on offer by banks in New Zealand. Photo / NZH
TSB has turned up the heat in a battle between banks for mortgage market share.
It has announced it has cut its two-year mortgage rate to 5.3 per cent from 5.5 per cent, making its rate the lowest on offer by banks in New Zealand.
Most other advertised two-year mortgagerates are around 5.5 per cent to 5.6 per cent.
TSB is already offering 5.2 per cent for its one-year mortgage rate, which is also the lowest rate on offer. Most other banks are stuck around 5.25 per cent.
TSB's move came after Kiwibank allowed its one-year 'special' rate of 4.99 per cent to lapse late last week. Kiwibank's special offer fired up a fresh bout of competition in the banking market, fueled by a fall in wholesale mortgage rates and an increase in bank net interest or profit margins. Kiwibank gathered over NZ$200 million in extra business from the special.
Wholesale 'swap' interest rates, which are the basis for fixed mortgage rates, have fallen 50-80 basis points in the last six weeks as concerns about the global economy and New Zealand's own economic outlook have mounted.
Financial markets are betting the Reserve Bank of New Zealand will cut its Official Cash Rate by around 45 basis points over the next year to around 2 per cent.
The OCR is the basis for floating mortgage rates, which are advertised around 5.7 per cent, although many customers with high levels of equity and good credit records pay floating rates of around 5.2 per cent to 5.3 per cent in competitive situations.
However, bank economists are still forecasting the Reserve Bank will hold the OCR until March next year and will then increase the rate to around 4.0-4.5 per cent over the next two years.
The five-year swap rate, however, is around 2.95 per cent, suggesting many financial market players see the OCR below 3 per cent in five years time.
