The mortgage rate wars have stepped up a notch with another bank offering a sub-2 per cent rate.
HSBC has launched a 1.99 per cent rate for both 12- and 18-month fixed terms matching Heartland Bank’s rate.
On top of that HSBC has loosened its criteria opening it up to households who earn over $125,000.
Previously those who wanted to grab HSBC’s special rates had to qualify as a premier customer by borrowing a minimum of $500k or having a balance of at least $100k in the bank.
Martine Milicich, head of wealth and personal banking at HSBC, said it had expanded its eligibility criteria so that significantly more people would be able to take advantage of the opportunity.
Eligible borrowers now only have to qualify for one of the three criteria.
The rate is being offered to new customers and existing premier customers who borrow an additional $100k.
She said HSBC had changed its premier offering globally over the last year after it found that people took out a $500k loan but then paid it down and fell out of the criteria.
“We put in an income criteria which means those customers who meet that criteria or have those deposits or home loan will actually meet our criteria and therefore we will be able to support these premier customers throughout their lifespan. It makes a lot more sense from that perspective.”
Heartland launched the first-ever sub-2 per cent mortgage rate in New Zealand in October last year with a 1.99 per cent rate for one year.
To be eligible, customers must be refinancing or buying a standalone house on a single section, have a deposit or equity of at least 20 per cent – and intend to live in the home.
So far the major banks – ANZ, ASB, BNZ, Westpac and Kiwibank have not followed suit although they have dropped their one-year rates to 2.29 per cent with a range of different conditions.
Milicich said it hoped the criteria change would help boost its mortgage book which is worth around $2.2 billion or just under 1 per cent of the market.
“I think it will help us to grow our mortgage book but it will be for one section of customers. The reality is the dominant criteria for our mortgages will still be the half a million cut-off.”
She said in Auckland there were a lot of customers who would meet that criteria but change was designed to capture those who had a good income but might only want to borrow $200k.
“They are the ones that we really want to keep.”
HSBC’s drive for more customers comes a day after the Reserve Bank announced it was tightening the amount banks could lend to low deposit borrowers in a bid to cool the hot housing market.
From March 1 banks will only be able to do up to 20 per cent of new lending to owner-occupiers with a deposit under 20 per cent and up to 5 per cent to investors with a deposit under 30 per cent.
Then on May 1 it will ramp up again for investors with banks only allowed to lend up to 5 per cent to those with a deposit of less than 40 per cent.
But the Reserve Bank has said it expects the banks to respect the changes immediately.
ANZ moved to a 40 per cent deposit requirement for investors before Christmas while ASB, BNZ and Kiwibank introduced the requirement for investors last week.
House prices have risen 17 per cent in the last year defying predictions that the market would drop 5 to 10 per cent when New Zealand went into lockdown in March last year.
Milicich said when the Reserve Bank removed the loan to value ratio restrictions last year it didn’t change its lending criteria and stuck to requiring a 20 per cent deposit for owner-occupiers and 30 per cent for investors.
“For us we now just need to slightly modify down to 60 per cent [40 per cent deposit].”
She said there were numerous things that fed into house prices – supply, returning Kiwis, Reserve Bank action, consumer confidence.
“I don’t think this rate will have an impact to fuel the market.”
She said historically tweaking the LVR setting had changed the market and she expected these tweaks would have an impact.
Are rates as low as they will go?
Milicich said: “If you had asked me a two weeks ago I probably would have said no. But given what happened last week with employment, the wholesale rates have ticked up a bit so it might be starting to turn.”
But she said no economist was predicting that yet.
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