Record new low: Bank slashes home loan fixed interest rate to 2.69 percent

Bank home loan rates drop
The low rate will provide home buyers - and homeowners coming off fixed rates - with a little extra cash. Photo credit: Getty.

Just as homeowners thought that interest rates just below 3 percent were a good deal, the bar has just moved even lower.

Following ANZ chopping the rate on one-year fixed loans to 2.79 percent - a move that was quickly matched by Westpac - ASB Bank has announced an even lower fixed rate of 2.69 percent for two years. The rate applies to new home loans, and existing home loans rolling off higher fixed interest rates.

Calling the interest rate of 2.69 percent "unbelievably good", Mike Pero, founder of Mike Pero mortgages, said that with lockdown over and more buyers entering the market, demand for homes, particularly those under $1 million, is likely to ramp up.

"The competition's heating up: banks are looking for customers, traditionally, first-home buyers borrow the largest hunk of money off the bank and if job security is there, in some cases, they could borrow up to 90 percent," Pero said.

The combination of removing the LVR restriction, record-low interest rates and talk that house prices could fall by up to 15 percent is likely to increase competition, particularly among first-home buyers.

"Job security and interest rates are the two motivators: if you've got the job security and there's two of you working (or one earning good money), I'd be thinking now is a good time to buy," Pero added.

ASB executive general manager Craig Sims, said that the new low rate of 2.69 percent comes at a good time for both homeowners and first-home buyers.

“This new rate is incredibly competitive and we’re proud to be doing our part to support our customers on their home ownership journey. 

"We hope this will help them manage their home loans or enable others to be in a position to get into their first home,” Sims said.

He said that support for homeowners facing hardship during COVID-19, such as 'mortgage repayment deferrals', where re-payments could be put on hold for up to six months, and changing payments to interest-only were part of the campaign to support financial wellbeing.

“We're conscious that the impacts of COVID-19 will still be felt for a while to come and we will continue to help our customers through that," Sims said.

On Friday afternoon, Kiwibank announced an even lower rate of 2.65 percent for a fixed term of one year.  The bank also announced a two-year fixed term rate of 2.79 percent.  The rates are available to new and existing Kiwibank customers with a minimum of 20 percent deposit (equity), from Monday, May 25.

Earlier this week, ANZ and Westpac announced drops to their fixed home loan rate, to 2.79 percent.  Westpac confirmed that its 2.79 percent fixed home interest rate for one or two years will be available from Monday, May 25.

ASB's rate of  2.69 percent for a fixed term of two years is effective from Saturday, May 23. 

Reserve Bank monetary policy tools have lowered wholesale interest rates, and banks are urged to pass on cost-savings in the form of lower retail interest rates. 

This new round of all-time interest-rate lows is good news for people looking to buy a home or coming off a fixed interest rate, providing an opportunity to negotiate a competitive rate with their bank.