ANZ has dropped its one-year mortgage rate to 5.59%, significantly undercutting its competitors.
The cut to the bank’s discretionary non-advertised rate is being offered to both existing and new customers who have at least 20% equity and comes ahead of the Reserve Bank of New Zealand’s Official Cash Rate announcement tomorrow.
EasyStreet Mortgages mortgage adviser Gareth Veale said the 5.59% rate was lower than what they would have immediately expected and he was now watching to see whether there would also be movement in the six-month rate, which was still being advertised at 6.75%.
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“They haven’t waited for the OCR so my suggestion is that they know something more than anyone else does and that OCR is going to be cut by 50 basis points tomorrow so how good.”
Veale said there had been commentary that the neutral position for the OCR would be around 3% and fixed rates would then be about 2% more taking them to an eventual landing spot of about 5% so 5.59% was not too far away from that.
The last time the one-year mortgage rate was this low would have been about three years ago, he said.
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“It’s a good rate good to go into if you can. It sort of makes that six-month rate differential not really worth it anymore.”
He now expected the other major banks to follow ANZ’s lead as they all tried to compete for the same market share.
“I would hope the rest of them get to that or as close to that as possible otherwise new business will towards ANZ.”
However, he believed it was good news all around. “What it means for borrowers is they are paying less in interest and it will fuel property prices.”
Tella chief executive Andrew Chambers said it was a “pretty big and bold” indication of where the market was going. He was now expecting some big rate drops from the other banks very soon.
“It’s coming down quickly that’s the bit that’s really surprising me.”
Chambers said after the Reserve Bank dropped the OCR by 25 basis points last time it resulted in banks cutting rates by about 70 basis points.
“Last week ahead even before tomorrow’s announcement we saw another 10 basis points coming off one year and today ANZ has come out with this. It sort of indicates that even if the Reserve Bank goes another 25 basis points tomorrow we are probably likely to see another 60 basis points coming off.
“So the banks are going to march ahead of the Reserve Bank obviously in realigning rates.”
SBS Bank lowered its six-month rate of 5.99% in September for new customers who met its strict criteria.
However, Chambers said there was a difference between the SBS Bank offer and what ANZ was doing because the ANZ rate was available to both new and existing customers and was “effectively shifting the market down”.
He expected other banks to also drop their rates even if they waited until after the OCR announcement and said most people would probably wait until the end of the week to see what played out.
“ANZ has fired the shot, but that doesn’t mean someone is not going to come in a bit lower after OCR.”
An ANZ spokesperson confirmed it was offering existing ANZ customers and new customers a special 1-year fixed rate of 5.59% for a limited time.
Due to the limited nature of the special, the rate was not being advertised or promoted externally.
The rate was aimed at promoting customer loyalty and retaining customers in a competitive environment, the spokesperson said.
The special rate is available to all existing customers via frontline distribution channels, goMoney, and Internet Banking when refixing their loan and to new customers via frontline distribution channels.
"Existing ANZ customers can also choose the special rate when locking in a new rate up to 60 days from when their existing loan is due to refix."
Meanwhile, Kiwibank has today announced it will cut its variable home and business loan rates by 0.5%. The bank’s variable and offset variable home loan rates will fall from 8.25% to 7.75%, and revolving home loans from 8.3% to 7.8%. The new rates come into effect on October 14 for new lending and October 29 for existing lending.
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