NZ mortgage war heats up

By Leith van Onselen

The competition for mortgage lending is heating up in New Zealand. Last month, government-owned KiwiBank announced that it would drop its six month fixed mortgage rate to just 4.79%, which is reportedly the lowest mortgage rate offered by a New Zealand bank for “many decades”. And today, ASB (owned by the CBA) announced that it would give borrowers a free 42-inch Sony Bravia LED TV as well as up to $NZ1,000 cash-back for anyone that takes out a mortgage in excess of $NZ100,000 (including refinancings from another lender).

New Zealand mortgage rates have been near record lows since early-2011 (see next chart).

And the growth of mortgage debt has picked-up pace over the past year, which is helping to fuel house prices, especially in Auckland (see below charts).

The RBNZ needs to expedite the implementation of macroprudential controls on mortgage lending before the situation gets out of hand.

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Comments

    • I forget how many years ago it was that fringe socialist politician Jim Anderton (Nicknamed “Jamderton” i.e. “Jammed-It-In”) made the establishment of Kiwibank a condition of his support for one of those messy Coalition agreements that MMP often necessitates.

      I predicted at the time that this would cost the NZ taxpayer billions, firstly establishing it, secondly running it, and lastly and biggest of all, bailing it out one day. And it would (or should) end up being known as “Jamdertons Folly”.

      The first two were hardly “predictions”, they were pretty much part of the deal. The last one has been a few years coming, but the way Kiwibank has been behaving re mortgage lending makes it look like it is filling the sort of role in NZ that certain politically-directed institutions filled in the USA’s famous house price bubble.

      Aussies worrying about whether NZ will “pay its share” one day in bailing out the Big Aussie banks, need to realise that NZ taxpayers will have quite enough burden bailing out “their own bank”.

      • I think South Aussies are still paying for out state bank debacle. That loss was only $4B but the govt sold off everything to pay for it. Ah the good old days. Looks like they will be coming back!

      • Hi Phil,

        pretty sure you will find that either in 2011 or 2012 the Kiwi’s wrote into law that if foreign interests in Kiwi Banks fall over they won’t cover them – Australian RBA style.

        HnH covered this I think…

        So who really owns the risk?

        I would suggest the Australian banks excluding the Kiwi owned KiwiBank!

        That is all theirs “Kia Kaha”

        😉

        TM.

  1. “…The RBNZ needs to expedite the implementation of macroprudential controls…” Yawn…That’s not going to happen. If it did, imagine what it might suggest for the RBA! Are they ready to implement any sort of rules, macro or otherwise to control your property market? Are they, heck….and that’s why the RBNZ will just TALK!..Its can’t move until it is ‘allowed to’ by the RBA who in-turn must consult higher a power before they do anything starling…We couldn’t have the poster child of the GFC rocking the boat, could we…

    • I think you will find that the BRNZ are their own man, so to speak. The problem is more one of intellectual capture, whereby those who run the RBNZ (and RBA) and all those who advise it, are all cut from the same cloth and beholden to the same type of thinking/stream of economic belief.

      • That’s what I’d always thought, Stu…The courage of David Lange and the sense of Alan Bollard…but no. What do we have today? Graeme Wheeler…

    • I was thinking of you when I saw the headline, Janet. You were right about all of the jawboning. People will not do the right thing. They will do what they are forced to do.

  2. Here’s the lunacy of RBNZ macro, micro or pretty much any other sort of (non)controls on the property market, summed up in two unrelated stories “North Island’s worst drought in 70 years” and “House prices soar to record high” So we get dairy (your iron ore) flattened and yet we get our economy ‘saved’ by recycled housing speculation. I wonder where the NZ economy is off to ( point me in the direction of the nearest cliff, please)
    http://tvnz.co.nz/business-news/house-prices-soar-record-high-5363659
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10870345

    • The “lunacy” is shared very widely Janet. One could be forgiven for thinking that it isn’t lunacy, but a deliberate strategy. Unless of course, one believes that all the very “best and brightest” “experts” sitting atop the world’s most powerful financial institutions are all fools, blindly driving the world towards an economic mass extinction event.

      • Op8…I’ve been pondering which is the scariest alternative! We’ll have to hope the ‘fools’ theory is correct but…

        • The outcome is the same, no matter how one’s personal weltanschauung prefers to frame this topic. I simply find it interesting that so many who do see where it all appears to be inexorably heading, choose not to think long and hard about which of these categories nearly all those at the top best fit into – lunatics, or fools. In either case, however, surely the logical conclusion is that none of them should still hold the positions and power that they do … ??

  3. Out of control? Any bank that starts offering “free 42-inch Sony Bravia LED TV as well as up to $NZ 1,000 cash-back” just to get new business is as desperate as the new home developers in OZ. I see a) lay-offs &/or consolidation as the inevitable result (much like has happened in oz)

  4. Ha Ha what a joke! Just one Sony Bravia for interest paid in hundreds of thousands of dollars…..and free supply of kiwi over the life of loan. Earthquake made serious damage to their brains!

  5. What asshole would get a mortgage because of a SONY TV. If these types of tactics work then government regulation is needed to stop feeding of people that have no idea and can’t control themselves.

  6. Not sure if the split between investors and owners looks like it does in Aus – but this sort of competition says to me that any short-term price bounce is being driven by investors and owner buyers are not playing.

    I’m surprised by this – but it is what is happening – investors are pulling themselves up by their boot-straps?