Borrowing rates

The Big 4 banks “constantly, continuously and always” revise lending rates after the big drop in Kiwibank’s variable rates

Kiwibank last week cut its variable and floating mortgage rates by 100 basis points, including real estate loans, variable business loans, revolving business loans and corporate overdraft rates.

The move cuts the floating rate on Kiwibank’s home loans to 3.40%, more than 100 basis points lower than the carded or advertised floating rates offered by ANZ, ASB, BNZ and Westpac. It also brings the variable rate closer to the one- and two-year fixed rates, which for some banks are as low as 2.55% and 2.65%, respectively. Consult here the rates of mortgages announced or on card of all the banks.

Kiwibank’s variable rate changes went into effect for new customers on Monday and will apply to existing customers on June 29. Explaining the reduction, Kiwibank CEO Steve Jurkovich said the difference between floating rates and fixed rates had “felt uncomfortably large for a while”.

So what about Kiwibank’s four big rivals? So far, none have followed by announcing cuts to their own floating rates, while a large rate cut by a bank is often quickly followed by similar action from rivals. therefore asked the spokespersons of the Big Four a few questions. The questions and their answers are below.


Question 1) Does ANZ plan to reduce its variable card or advertised lending rates in the near term?

Reply: We are constantly reviewing our mortgage rates based on market conditions.

question 2) If there is no plan to reduce them, will ANZ adapt to the market if customers ask it to match the lower rates offered by its competitors?

Reply: As above.

Question 3) Does ANZ think its current carded variable rates are justifiable and if so why?

Reply: We are constantly reviewing our mortgage rates. Over 85% of our home loans are fixed rate and we currently offer one of the lowest mortgage interest rates on the market with a competitive one year fixed rate of 2.65%. Customers typically choose a variable loan as part of their loan structure for more flexibility in using and managing their loans than fixed rates offer. The interest rate differs accordingly.

Question 4) Did ANZ change the margins on business loans during the current tough economic conditions, and if so, were they increased or decreased and why?

Reply: We constantly review our rates and lines of business credit, taking into account market conditions and the current environment. We have not changed our risk-based approach to margins for business loans during the Covid-19 pandemic and associated foreclosure. We have, and continue to provide, a range of supports to businesses affected by Covid-19 and encourage customers to contact ANZ to discuss their financial needs and how ANZ can support them.

Westpac’s responses

Westpac NZ understands that Covid-19 has hit our customers hard and we strive to support them with competitive rates across the business. We are constantly reviewing our prices but have no changes to announce at this time. We will continue to assess all loan applications on a case-by-case basis, depending on the borrower’s individual situation.

In March, we passed on the total 0.75% OCR reduction across all of our variable real estate rates. They are part of our range of housing rates, which also includes a special two-year fixed rate of 2.69% and a special three-year rate of 2.79% which is the lowest among our major competitors. Currently, 84% of our real estate balances are fixed.

The rates we offer to business loan clients are based on a variety of factors including cost of funds and the client’s individual circumstances. We have also applied the total 0.75% OCR reduction to all of our variable rates on business loans. In most cases, changes in wholesale rates have resulted in lower customer rates.


Question 1) Does ASB plan to reduce its variable, carded or announced lending rates in the short term?

Reply: ASB continually reviews our rates to ensure that we are able to support our clients in their financial progress, which includes helping them access homeownership. As part of this, you will see that we have recently reduced some of our fixed interest rates for home loans, so we now offer one of the lowest fixed interest rates ever recorded by ASB, at 2.69% during two years. We find this historically low fixed rate to be extremely popular with our clients and the vast majority of clients continue to place the majority of their mortgage at fixed rates. Due to trade sensitivity, we are not commenting on any future rate change decisions.

Question 2) If there is no plan to reduce them, will ASB adapt to the market if customers ask it to match the lower tariffs offered by its competitors?

Reply: ASB focuses on pricing the overall lending relationship, which may include fixed or floating loans, as well as any incentives the customer may be eligible for. We work closely with each client to ensure that the best and most affordable mortgage loan structure is obtained to meet their individual needs today and in the future. ASB is convinced that our mortgage clients benefit from good value for money thanks to our competitive offers.

Question 3) Does ASB think its current card variable rates are justifiable and if so why?

Reply: See comment above. As always, ASB supports our clients in their homeownership goals and with mortgage rates at historically low levels, we are very confident that our mortgage clients are getting value for money from our very competitive offerings.

Question 4) Did ASB change the margins on business loans during the current tough economic conditions, and if so, were they increased or decreased and why?

Reply: Overall, the pricing of business loans remains in line with prevailing market conditions. These generally follow what is happening with OCR and other benchmarks in the market. With the 75 point cut in the OCR on March 16, all business loan rates were reduced in line with this change. As part of ASB’s commitment to helping business customers affected by Covid, we also introduced a range of relief options that included sharply reduced overdraft rates and fee waivers. In addition, we have also participated in the government business finance guarantee program, which also offers heavily reduced lending rates.


We are always reviewing our rates and although we have no changes to announce at this time, we have a market leading 18 month fixed term rate and all of our classic rates are below 3%. The home loan market is very competitive and we invite anyone considering their home loan options to speak to BNZ.

The pricing of our home loans is based on various factors, such as OCR, cost of funding and capital, risk, etc. Fixed and floating rates are different products and their different pricing reflects the different composition of these inputs. New Zealanders overwhelmingly prefer the certainty that fixed rates give them, with around 85% of borrowers on these rates.

When it comes to business loans, we have made various changes to help our clients get through Covid-19 and the recovery. Apart from the BFS (which we set at 2.50%), we reduced the commercial overdraft rates by 1.30% at the start of the foreclosure and we significantly reduced the underlying base commercial rate, passing through the advantage over our customers. Lines of credit are applied on a case-by-case basis and reflect the individual circumstances of clients.

The era of QE and cheap finance

To combat the economic slowdown caused by COVID-19 and to help banks, the Reserve Bank has launched a quantitative easing program up to $ 60 billion and cut the official cash rate to just 0.25%. In its financial stability report last month, the Reserve Bank said:

” In March, [bank] financing conditions in wholesale markets have deteriorated. Credit spreads widened, dramatically increasing the cost of banks accessing wholesale financing. However, since February, no New Zealand bank has needed to issue term financing on these markets, because the extension of the average duration of their financing in recent years now allows banks to wait for the exit of funds. market turmoil, and only to return to those markets when they have normalized. “

“The banks’ stable funding positions have also been supported by large net inflows of deposits since the escalation of the crisis. This is primarily attributed to government programs such as the wage subsidy, but has also been supported by growth in household transaction balances and savings accounts, “the Reserve Bank said.

Meanwhile, in its Annual Financial Institutions Performance Survey (FIPS) published in February, KPMG said bank funding costs had fallen to their lowest level in 33 years of FIPS existence. It was 2.59%, down 11 basis points year-on-year from the previous low in a FIPS. This is the third year in a row that financing costs have fallen to a new low, according to KPMG.

* This article first appeared in our email for paid subscribers. See here for more details and how to subscribe.