NZ Mortgage Wars: Who Offers The Lowest Home Loan Rates In New Zealand?

Date Jun 17, 2021
Blog category Mortgage
By Sieg C
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To combat the rapid and astronomical rise of housing prices throughout the country, major banks and lenders have been extra competitive to offer the best home loan rates. What’s more, they aim to help Kiwis recover from financial difficulties caused by the COVID-19 pandemic. 

Joining the action, ASB decided to match its rival lenders for the longer-term rates. It’s now at 2.99%, 3.39%, and 3.69% for three, four, and five-year fixed terms respectively. Their short-term home loan rates remain at 2.99%, 2.49%, and 2.59% for six, 18, and 24-month terms. These numbers are all for their standard fixed-term home loans.

Chief Economist Nick Tuffley says this is because the housing prices growth is slowing down. “The growing headwinds that have picked up over the past year, including the government tax changes, slow investor demand, and we may also start to see some natural slow down with house prices very high relative to incomes, and mortgage rates not likely to fall any lower.”

How does this move influence the housing industry? Which bank or lender offers the lowest home loan rates? And, why are they exactly fighting a mortgage war? Are low mortgage rates always better for you and the housing market? 

Why are major banks and lenders competing for mortgage rates?

It’s an economic strategy by the leading banks and lenders. They want to lend more money to revitalise the housing market. 

As house prices go up, it can turn a lot of Kiwis off from buying a home. Of course, this isn’t good for the housing sector as it can stagnate the market, which may result in even higher prices. To combat this, the only way is to convince Kiwis to purchase or build more homes. That’s where the banks and lenders come in.

They compete with each other on who can offer the lowest home loan rates. In a way, this makes for healthy competition. For New Zealanders who have been wanting to purchase a house for a very long time, it’s time to take advantage of this opportunity to have a place you can call home.

Is this plan sustainable for the economy in the long run?

It’s a great way to help the industry, especially when it’s at its lowest. This encourages Kiwis to buy houses because they can now secure funding for their purchase. However, this shouldn’t be utilised in the long run. Low home loan rates can hurt the economy in the future.

Revitalising the industry by letting people borrow more money isn’t sustainable. It can increase debts and reduce savings. This can result in greater economic consequences such as account imbalances, trade deficits, and subsequent fiscal deficits. These factors can contribute to even worse situations such as recession and depression.

As much as possible, low-interest rates should be done only temporarily. Think of it as a band-aid solution to the worsening problems. It’s just a patch — the problem still needs to be treated through better policies and laws.

What’s the impact of low interests in the housing market?

The low-interest rates for home loans seem to be working. Since mortgages started dropping last year, it has caught the attention of New Zealanders located overseas. Real estate agencies have reported an increasing number of enquiries from expats on how to purchase houses. The same increase is also seen in the online traffic of different real-estate and immigration websites.

However, the low-interest mortgage rate is one of the reasons why Kiwis from overseas want to return home. With New Zealand’s success in fighting COVID-19, expats want to go back home because it’s safer. Although the country has essentially controlled the threat of the virus, many countries are still in a constant battle, making returning home an appealing option.

Meanwhile, Kiwis inside New Zealand, especially those who have been wanting to purchase their first home for a long time, are also taking advantage of these low-interest mortgage rates. Those who have been putting off their first home purchase are also grabbing this opportunity.

Are mortgage rates returning to normal?

It’s hard to determine the “normal” rates since it’s always relative to the economic situation. However, as the financial and housing sector become more stable, you should see an increase in home loan rates from the leading providers. 

Of course, it’s hard to tell for sure if these improvements can be sustained in the next few months. Through studies, economists can at least predict the trend the industry will lead. As of the latest quarterly economic predictions of ASB, housing prices are unlikely to fall in the next year. That’s why they decided to increase their prices to match their competitors.

As with any financial statistics, this can change very quickly. The economy is still unpredictable, especially as the global trade still recovers from the crisis brought about by the pandemic. For now, you can trust the experts about their predictions.

What are the current mortgage rates from leading banks?

If you’ve been putting off your first home purchase, it’s good news for you! The mortgage war isn’t over just yet, so you can take advantage of these low-interest rates. Check out the best home loan rates from major banks and lenders. As a disclaimer, take note that these rates and terms may not be real-time and can always change.

Lender Product Variable 6 months  12 months (1 year) 18 months 24 months (2 years) 36 months (3 years) 48 months (4 years) 60 months (5 years)
ANZ

Standard 4.44% 3.99% 2.79% 2.95% 3.19% 3.59% 3.99% 4.39%
Special LVR   3.39% 2.19% 2.35% 2.59% 2.99%    
ASB

Standard 4.45% 2.99% 2.19% 2.49% 2.59% 2.99% 3.39% 3.69%
Back My Build 1.79%            
Bank of Baroda Standard 5.25%   3.85% 3.90%      
Bank of China

Standard 5.00% 5.15% 2.25% 2.35% 5.50% 5.70% 5.99%
Special  4.35% 3.45% 2.15% 2.15% 2.55% 2.75% 3.05% 3.35%
BNZ


Special Classic   2.99% 2.19% 2.35% 2.55% 2.99% 3.39% 3.69%
TotalMoney 4.55%            
Std & Flybuys 4.55% 3.59% 2.95% 2.79% 3.15% 3.59% 3.99% 4.29%
China Construction Bank Standard 5.00% 4.70% 4.70% 4.80% 4.95% 4.95% 4.95%
Special 2.65% 2.65% 2.65% 2.80% 2.89% 2.99%
Co-operative Bank Owner Occupied 4.40% 2.19% 2.39% 2.19% 2.59% 2.99% 3.39% 3.69%
Standard 4.40% 2.69% 2.89% 2.69% 3.09% 3.49% 3.89% 4.19%
First Home Buyer Specia 1.99%
Heartland Bank Residential 1.95% 1.85% 2.35% 2.45%
Reverse Mortgage 5.95%
HSBC Premier 4.49% 2.79% 2.19% 2.19% 2.48% 2.69% 2.99% 3.19%
ICBC Standard 5.79% 5.35% 4.49% 4.69% 4.99% 5.45% 5.49%
Special 3.69% 2.89% 2.25% 2.35% 2.35% 2.65% 2.89% 2.99%
Kiwibank Standard 3.40% 4.30% 3.04% 3.40% 3.84% 4.24% 4.54%
Special 3.55% 2.19% 2.55% 2.99% 3.39% 3.69%
Offset Mortgage 3.40%
Kookmin Standard 5.20% 3.90% 3.90% 4.00%
SBS Residential 4.54% 3.89% 2.69% 2.89% 2.99% 3.29% 3.59% 3.89%
Special 3.39% 2.19% 2.39% 2.49% 2.79% 3.09% 3.39%
Unwind reverse equity 5.85%
TSB Standard 5.34% 3.69% 2.99% 3.15% 3.35% 3.79% 4.19% 4.19%
Special 4.54% 2.89% 2.19% 2.35% 2.55% 2.99% 3.39% 3.69%
Westpac Standard 4.59% 3.59% 2.85% 3.05% 3.19% 3.59% 3.99% 4.29%
Special 2.99% 2.25% 2.45% 2.59% 2.99% 3.39% 3.69%
Choices Offset 4.59%
Choices Everyday 4.69%
Source: Interest.co.nz

Who offers the best interest rate for a mortgage plan?

A home loan interest rate isn’t one-size-fits-all. Different people have varying needs, so what works for other people may not work for you. Talk to professionals — from choosing the right home, mortgage plan, interest rate, legal processes, and more. This way, you can guarantee that you have the best plan.

Or, get a quote from the leading banks. This allows you to have a wider outlook on which home loan interest rates will fit your needs. Otherwise, you can use a mortgage calculator, like the ones we have at glimp, to easily compare rates.

How should you choose the right mortgage plan?

A mortgage is the biggest single bill for a lot of Kiwi households. One of the most important things to remember is you have to make loan repayments for anywhere between 10 and 25 years. Rushing or choosing just whatever mortgage can lead to severe financial consequences later on in your life. It’s crucial to choose the mortgage plan that you can afford in the long run.

Check out all the related fees

Besides the monthly mortgage repayments, you should check all the fees related to your mortgage. No matter how little it is, it can still accumulate over time. These can be paid upfront or in the long term. Some fees you should look out for are:

  • Establishment fee: This works like a deposit that you have to pay upfront when you take out the mortgage. This ranges from $400-$500.
  • Service fee: This is a monthly fee that covers the maintenance of your mortgage plan. This is very common on mortgages but not in other types of loans.
  • Legal and settlement fees: This is the fee to manage the legal framework of buying a home. Usually, this is around a $2,500 one-off payment.
  • Discharge fee: This is a one-off payment once your mortgage is paid in full.
  • Early repayment fee: This is a one-off fee if you paid the mortgage before the agreed date. This is to compensate the lender for the loss of interest.
  • Feature fees: This includes extra repayments and ongoing fees for redrawing facilities or an offset. This can be paid for free, depending on the lender.

Choose a shorter-term mortgage if possible

If you have the financial capabilities, pay for the mortgage plan for a shorter period. While you can lower your monthly repayments if you choose a longer-term mortgage, it can also increase the incurred interest. When you total your payments, it’s actually more expensive if you choose the longer term.

However, a big drawback to shorter-term loans is high monthly repayments. You have to allocate a hefty sum of your monthly budget just for the mortgage plan. Make sure to manage your finances better so you don’t have to be tight about your budget.

Understand your repayments allocation

Your repayments either go to the repayment of your principal mortgage or interest. Usually, most of your repayments during the first few months pay the home loan. This means that most of your later repayments go to interest. The longer your home loan term, the more interest is charged by the bank or the lender.

Although this is the most common for major lenders, this still varies per bank. Always ask the lender about this, so you can choose your repayment terms and home loan better. This can also help you decide on your future repayments and advanced payments.

Remortgage when your fixed term expires

When your fixed term interest rate expires, remortgage with confidence. You don’t have to get stuck with a previous interest rate or term that doesn’t work out for you. Remortgaging is a very easy process, but not a lot of New Zealanders are taking advantage of this option.

Aside from negotiating with your term and interest rates, you can also choose a different bank or lender. Many banks offer plenty of competitive rates and fees, which may better suit your needs. They also offer some remortgage promotions for your switch.

Compare home loan interest rates before finalising your plan

Don’t just set your sights on one home loan plan. Make sure you have quotes from different banks or lenders and compare them side by side. This way, you can ensure you have the best interest rates and mortgage plan.

Get the best rates for your mortgage plan using our mortgage calculator right here at glimp!

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