Three rate cuts by ASB in two weeks; Kiwibank trims too (2024)

11th Mar 24, 8:32ambyDavid Chaston

ASB has opened this week with another small trimming of some carded fixed home loan interest rates.

This is their third adjustment lower in the past three weeks.

But these latest changes don't establish any new market-leading levels - mainly they are ensuring they remain competitive at the short end.

ASB has taken -10 bps off their six month fixed, -5 bps off their one year rate, and -6 bps off their two year rate.

That means they now line up with BNZ with the lowest six month rate among the main banks, but are still 10 bps high than market leaders China Construction Bank and ICBC.

For the one year rate, ASB now matches ANZ and BNZ. For the two year rate they are now matching these same two rivals.

We should keep an eye on the very short six month rates. The latest RBNZ data shows borrowers are choosing that rate increasingly and at volume, apparently in the belief that paying a higher rate now will pay off "when" home loan rates start falling on the back of OCR rate cuts later in the year.

And they are supported in this view by wholesale market pricing. Those money markets are currently pricing in most of a -25 bps OCR cut by August, and another by November. How this will play out in two year fixed home loan rates is unclear however, but the expectation is clearly there. Current two year fixed mortgage rates are -50 bps lower than current six month rates, so there is clear risk in this strategy.

ASB has also dropped its 12-month term deposit rate to 6.00% (from 6.10%) and four term deposit rates at the longer terms by between 5 and 20 basis points.

Update: Kiwibank has also trimmed its rate card. And like ASB none of the new Kiwibank rates are market-leading, rather just matching the new eased levels.

Wholesale swap rates ticked lower after the dovish RBNZ moves, and at the end of last week the pace of these retreats picked up. The trajectory is headed back to levels we saw between Mid-December and mid-February.

Obviously you should negotiate and shop around. Most banks will discount their carded home loan rates if you have strong financials. You shouldn't need them but if you are uncomfortable negotiating, a broker can often be helpful. But be aware some brokers won't offer you the best over the whole market, only the banks they have approved connections to in their "lending panel." And clearly bank mobile managers are there to pitch their company's own product.

One useful way to make sense of the changed home loan rates is to use our full-function mortgage calculator which is below. (Term deposit rates can be assessed using this calculator).

And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options. But break fees should be minimal in a rising market. They will become important in a falling market however.

Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.

Fixed, below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at March 11, 2024	%	%	%	%	%	%	%
ANZ	7.35	7.24	6.89	6.79	6.65	7.34	7.34
	7.29 -0.10	7.24 -0.05	6.89	6.79 -0.06	6.65	6.55	6.55
	7.29	7.24	6.89	6.79	6.65	6.55	6.55
	7.35 -0.04	7.25 -0.10		6.79 -0.10	6.65 -0.10	6.55 -0.14	6.55 -0.04
	7.39	7.29	6.95	6.89	6.65	6.59	6.39
Bank of China		7.09	6.99	6.89	6.79	6.69	6.59
China Construction Bank	7.19	7.09	6.89	6.75	6.49	6.40	6.40
Co-operative Bank	7.39	7.24	6.99	6.85	6.75	6.75	6.75
Heartland Bank		6.69	6.59	6.45	6.19
ICBC	7.19	7.05	6.95	6.85	6.59	6.49	6.49
	7.35	7.24	6.99	6.85	6.65	6.55	6.55
	7.39	7.24	7.19	6.75	6.65	6.59	6.59