BNZ tries to start another price war

Well it had to happen – another price war looks like breaking out, and once again it is the Bank of New Zealand which is starting the fight.

Monday, February 28th 2005, 6:13AM

BNZ has announced that it is running another “Unbeatable” campaign, offering a two-year rate of 7.60%, which is 20 basis points lower than the other trading banks.

The move is interesting as the bank’s own economist, Tony Alexander, has been saying for a number of weeks running that fixing for three years is his preferred option.

While the move is being packaged by the bank as the start of another campaign, the reality is a little different. It’s not cutting its rates, it’s just not putting them up.

Its two-year rate has been sitting at 7.60% since just prior to Christmas when it ended its last campaign.

In recent weeks many lenders have increased their fixed rates by 20 basis points, but BNZ is signalling it isn’t going to move its two-year rate.

This is despite the fact that the cost of funding home loans is increasing. This is reflected in by the fact that it has increased its three, four and five year rates today (Monday) to 7.80% each – the same as other trading banks.

During the past week there have been a number of other changes to home loan rates, the bulk of them upward.

Of the major banks, ANZ and ASB increased rates. Both banks now have all their fixed rates at 7.80%. These are at the levels Westpac and National Bank moved to in the past couple of weeks.

Two of the second line banks, Kiwibank and TSB also increased their rates. The former increasing its six-month rate to 7.70% and the latter is one and two year rates.

Other lenders to increase rates last week included Equitable, Loan Society, Pacific Home Loans, Pioneer and the Public Trust.

Two-year rates range from a low of 7.40% offered by the Loan Plan, up to NZ Mortgage Funds’ 8.32% rate. The banks at, 7.80%, are at the top end of the table.

The range of three-year rates has tightened a little. The highest rate is Resi’s 8.35%, but the lowest has increased to 7.60%. Four lenders have rates at this mark including Bank Direct, HSBC, Loan Plan and PSIS.

Floating rates remain unchanged, however they will rise after March 10 if the Reserve Bank increases its official cash rate as expected.