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Summary
- Westpac reduced its mortgage rate by 20 bps, lowering it to 2.29% for 1-year fixed term.
- The bank is aiming to benefit from the ongoing rage in the NZ property market.
- House prices are likely to rise further which can put more strain on Kiwis.
Westpac Banking Corporation (NZX:WBC,ASX:WBC) has declared a mortgage rate of 2.29%, a steep 20 bps cut and the lowest rate offered by any of the 4 big banks in NZ. However, the special rate is only available on a 1-year fixed term for customers with 20% equity in owner-occupied homes.
The eligibility also includes that the minimum equity (20%) and the salary credit to a transaction account of Westpac has to be issued before the drawdown date.
The special interest rates also have a condition to not to be used with any other home loan offers, or discount packages of Westpac, and the rates do not apply to loans for business/investment reasons. The offer is effective from 11 January 2021.
Source: Shutterstock
Gina Dellabarca, NZ General Manger of consumer banking and wealth, stated that the special rate stood at 4.15% two years from now. It would have cost $1,119 for a fortnight to service a $500,000 loan over 30 years. However, the same repayment would be $885 a fortnight at the reduced rate of interest.
Even after a steep slashing of its 1-year fixed mortgage rate by Westpac, the rate is not among the lowest when other banks are also taken into consideration. HSBC has the same term for 2.25%, while Heartland bank has 1.99% fixed for 1 year, the first mortgage rate below rate in NZ.
Westpac taking advantage of the surge in NZ housing market
Westpac aims to benefit from a recent spark of interest in the NZ housing market. As per a Westpac spokesperson, the bank has come up with a special rate to reap benefits of the surging craze amongst Kiwis to buy properties. The special rate could help Kiwis to buy their dream home or pay their mortgages faster.
Source: Shutterstock
The special rate has come at a time when there are growing worries about the state of the housing market in NZ. The latest house price index by property market leader shows that property values have increased by 2.6% alone in December 2020. REINZ data showed that median house prices have hit $1 million for the first time in October 2020.
House prices are expected to rise by further 13-16% in coming months as per economists, which can lead to an outright unaffordability of houses in the future.
On 11 January, at the time of writing, WBC was trading at $21.77, up 0.6%.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)
