Mortgage interest rate war erupts between banks struggling to hit home loan targets

  • 03/03/2023

A mortgage rate war has erupted between banks struggling to hit home loan sales targets amid a slowing economy and a lower number of houses for sale.

It's no secret interest rates have gone up, with the official cash rate (OCR) currently sitting at 4.75 percent. 

Westpac has said new fortnightly mortgage repayments would increase in most areas of New Zealand.

But it turns out deals are being made behind closed doors. Last week, BNZ quietly offered a 4.99 percent, one-year mortgage to brokers only - more than 1.5 percent lower than its advertised one-year rate.

A customer from a competing bank has also claimed it matched BNZ's rate. 

So what's the magic word to open the door and get the great rate? According to independent economist Tony Alexander, such offers "come and go reasonably quickly".

He believed banks were experimenting with what might work for them.

"If you go through a broker, then you'll be able to access these deals because you don't know about it, the brokers do but they're basically told, 'Do not talk about these things,'" Alexander told AM.  

"I think the banks are worried that every man and his dog will show up and, suddenly, they're going to be writing business at a loss." 

Australia was also going through the same situation where banks weren't meeting sales targets, Alexander said.

People needing to fix or refix their mortgage should do so through a broker and negotiate better deals with the banks, he said.

If people get approved for a new mortgage, he said they shouldn't "blindly accept" the first interest rate that's offered.

"Remember, the Reserve Bank wants interest rates to go up so the banks are probably not advertising this because, if they make a big thing about it, they could put in a phone call and say, 'Maybe you want to not subvert our monetary policy.'"

High mortgage rates were coming at a time of a depressed housing market, which was wearing the impacts of tight Reserve Bank policy to bring spiralling inflation under control.

Forecasts from Westpac showed the OCR was expected to rise to 5.5 percent by June.