The home loan price war became a battle between two of the banks last week – the protagonist Bank of New Zealand and the ASB Bank.
Just to recap the BNZ is running its “Unbeatable” campaign that offers a two-year rate of 7.60%. It claims that none of the other big banks are able to match this.
However ASB Bank’s smaller subsidiary Bank Direct has a two-year rate of 7.50% and has been advertising this in mainstream papers, basically giving BNZ the raspberry.
BNZ has responded with its own full-page newspaper advertisements and is comparing its rates to ASB, rather than its subsidiary. In addition it put out a press release claiming ASB’s “attempts to discredit Unbeatable” muddied the waters for home loan customers.
So who is right? Well both are correct.
BNZ’s two-year rate has a number of conditions attached to it. The main two are BNZ is only comparing its rate to the other big four trading banks. It isn’t pitching its offer against the second-tier banks, such as ASB’s subsidiary, or non-bank lenders.
Secondly the rate only applies to its “Classic home loan” product, it excludes Fly Buys, GlobalPlus Home Loans and other packaged offers.
BNZ’s two-year rate for these other loans is 7.80% - the same as most of the other banks.
So when ASB’s little sister says it has a better rate it’s correct. Bank Direct is saying it wants to play with the big boys (although it refuses to disclose the size of its loan book) and BNZ is saying ‘go away squirt’.
The irony is that while these two slug it out, Kiwibank dropped its two-year rate 10 points to 7.50%.
Kiwibank’s move is interesting as it didn’t play the price war game at the end of last year – and reportedly lost market share – and is now in the game.
The other significant rate chop last week was the National Bank lowering its one year rate to 7.70%.
Aside from the skirmishes in the one and two year fixed rate area borrowers have seen more lenders increase their longer term fixed rates.
On the Monday before Easter Westpac increased its six-month, three, four and five year rates by 30 basis points each to 8.10%. Its one-year capped rate rose 5 points to 8.10% and its three-year capped rate went up 30 points to 8.45%.
Later in the week Kiwibank (which dropped its two-year rate) put up all its other fixed rates between 10 and 20 basis points. Others to increase rates included PSIS and Pacific Home Loans.
On the variable rate front lenders continued to adjust their rate in line with the Reserve Bank’s increase in the Official Cash Rate.
The only change of note was that small non-bank lender Silver Fern dropped its very cheap floating rate and replaced it with one which is in line with all the other lenders. During the week its variable rate went from 7.60% to 8.75%.
Variable rates range from 8.00% to 9.20%, but if you take out the highest and the lowest rates (NZ Mortgage Income Trust and Napier Building Society) the range narrows considerably to be from 8.45% to 9.00%.
In the keenly contested two-year rate market the range for standard rates is from 7.50% (Kiwibank and Bank Direct) to 8.64% (NZ Mortgage Funds).
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