Weekly home loan report: Banks keep chopping down two-year fixed rates

Banks are competing fiercely for home loan business by chopping their two-year fixed rates to levels well below other fixed rates.

Friday, February 20th 2004, 5:28PM

The Bank of New Zealand kicked the battle off just over a week ago when it dropped its two-year rate to 6.99% - along with a little trumpet blowing (“BNZ…sets a new market benchmark for two-year rates”).

Others lenders – mainly banks – followed suit with ANZ, ASB and National going to 6.95% (nothing like undercutting the market leader by 0.04%). Bank Direct went a little further to 6.90%, while HSBC and Sovereign (the biggest non-bank lender) dropped their equivalent rates to just 7.15%.

BNZ and HSBC also dropped other fixed rates and Westpac took its hybrid 30-month rate to 7.15%.

However BNZ counter-punched on Friday dropping its two-year rate another 20 basis points to 6.79%.

“Bank of New Zealand is setting the pace for two-year fixed rate home loans,” general manager of business development Andrew Whitechurch said. “We will continue to deliver a better deal to our home loan customers where we can.”

Most other changes during the week were falls in fixed rates right out to five years. Lenders who moved included AXA, GEM Home Loans, NZ Finance, Public Trust and SMC.

The only groups to put up rates in the past week were TSB Bank (one-year 6.90%) and SMC, NZ Finance and Perpetual Trust which all put up floating rates in line with what most other lenders have done since the Reserve Bank unexpectedly increased the Official Cash Rate 25 basis points last month.

The other interesting change last week was from Nelson-based Pacific Home Loans that set its one-year rate at 6.88%.

What's the best rate on offer?

No surprise that economists are picking the two-year fixed rate as the place to be.

"Our two year special…is a complete gimmee and easily better than the three year rate at 7.50%," says BNZ economist Tony Alexander.

For a full list of changes and to compare rates on offer go Mortgage rates page

For a full list of changes go the Rates Page.

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