Home loan rate war moves to one year market

While much of the attention in the home loan interest rate battle is focused in the two-year fixed rate market – thanks to the Bank of New Zealand – there is a move to shift the battle to another area.

Wednesday, November 17th 2004, 3:46AM

BNZ has been dominating headlines and advertising with its “Unbeatable” campaign, offer to better any two year rate offered by the major banks.

When ASB this week dropped its two-year rate to 6.95%, 20 basis points below BNZ, the big blue bank responded and pitched its rate at 6.90%.

However this week ASB and its sister companies Sovereign, Bank Direct and to a lesser degree NZ Home Loans, cut their two year rates and also cut their one year rates.

Currently they have one-year rates significantly below BNZ.

The strategy is two-fold: Firstly it is designed to deflect attention from BNZ and secondly there is a view that fixing one year is better than two, as rates are at cyclical highs and in 12 months time there may be far better deals on offer.

One of the most interesting developments is that Bank Direct – the no-branch bank – is offering rates which are higher than its sister company ASB.

Normally it is the other way around.

There is another trend developing in the market – that is the re-emergence of what could be called hybrid rates.

Two lenders, Westpac and Superbank have rolled out so-called “specials” of 18 month and 30 month rates. These are quasi-two year rates aimed to compete against BNZ, and hopefully deflect some of the media attention.

Westpac yesterday launched an 18 month rate of 6.99% and a 30-month rate of 7.19%.

Another strategy happening is the “below-the-line-approach”. While lenders have their carded rates it seems most are prepared to match BNZ. Superbank, for instance, has dropped its two-year rate to 7.19%.

However, word has it that Superbank, like other lenders, is prepared to match the BNZ, not just on rate but on all the added extras (legals etc) too.

Yesterday ANZ has joined the home loan rate war, dropping its two year fixed interest rate by 35 basis points. It said its two year rate would fall from 7.20% to 6.95% for new applications. Its six month, one-year, 18-month, four-year and five-year fixed rates are unchanged at 7.75%, while the three-year fixed rate will remains at 7.60%.

To compare all the home loan rates go to Good Returns mortgage rates http://www.goodreturns.co.nz/section/200.html

« Two-year rates go below 7%

Alarm over home ownership numbers is premature »

Special Offers