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<4% Rates, But Only Just

Rachel Alexander says sub 4% interest rates continue to see-saw back and forth across different leaders

By: Rachael Alexander

1 April 2019

Short-Term Interest Rates

After extending its special ione-year fixed rate last month, Westpach has withdrawn it from the market. Westpac has withdrawn it from the market. Westpac moved its one-year rate up from 3.99% to 4.05% on par with the owner main banks.

HSBC has been active in changing interest rate pricing during the month of March. HSBC moved the premier fixed rates up so that now the one-year, 18 months, and two-year rates sit at 3.99% — still sub 4%.

In addition, HSBC introduced a twoyear Premier special of 3.69% and takes the slot of the lowest fixed loan rate from any bank. In fact, HSBC’s 3.69% represents the lowest fixed home loan rate offered in New Zealand for over 50 years.

The “special” two-year fixed home loan rate of 3.69% is for a limited time only for new HSBC Premier customers, and for existing Premier customers who wish to borrow $100,000 or more.

On the deposit side, interest rates haven’t really moved. A few have slipped slightly (around five basis points), but most haven’t changed their deposit rates. Given the majority of bank funding is based on retail deposits, without a more convincing drop in deposit interest rates it is unlikely to result in sustaining sub 4% mortgage rates.

BNZ continues to offer differential pricing for owner-occupied versus investors. Mid-March saw BNZ increase their variable rate to investors up by 15 basis points, while keeping the variable rate unchanged for owner-occupied residential properties.

Long-Term Interest Rates

Continued downside risks exist to the global outlook.

It is expected the US inflation will remain tame as economic growth in the US is expected to further decelerate in 2019. As a result, the view is that the Fed will once again have to adjust the number of interest rate hikes expected this year.

The European Central Bank has promised to keep interest rates at historically low levels for the rest of the year, as it reacts to the threat of a recession across the Eurozone.

The Chinese economy continues to slow.

Overall, there has been no significant change in long-term rates.

Opportunities For Borrowers

Short-term fixed rates remain where the value is at for borrowers, with the longer-term rates still carrying too much of a premium.

As always, it’s worthwhile shopping around for the best rate or working with a mortgage adviser to negotiate on your behalf.


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