We have picked four banks to use as they illustrate the different pricing strategies well.
The first line to note is Westpac. It isn’t really competitive at all with pretty much the highest pricing for all terms except the four year rate.
But as usual it is worth noting the bank takes a different approach to things. It’s floating rate is rarely competitive as it tends to use the Choices Home Loan revolving credit rate as its competitor to other lenders’ floating rates.
We choose not to use that rate for this illustration as revolving credit loans have specific terms and conditions around them.
Westpac also is one of only a few banks to offers capped home loan rates. Yesterday it dropped its one-year capped rate from 6.50% of 5.49% and introduced a new two-year capped rate of 5.85%.
Westpac General Manager of Retail, Ian Blair, says capped rates offer customers the chance to lock in the maximum rate they will pay over the duration of the term of their loan. They marry the benefits of rate certainty and repayment flexibility for customers.
A home owner taking the capped product will pay the lower of either the current floating rate or the capped rate for the chosen term (1 year 5.49% or 2 yrs 5.85%). On this rate home owners can also choose to pay down more of their loan without incurring a break cost.
At the other end of the scale is SBS (its subsidiary HBS has identical rates). SBS has pretty much the lowest bank rates in the market. Kiwibank slightly beats it on the one-year term though. SBS doesn’t have a four year rate, and its five year rate (not shown on the graph) is competitive.
There are a bunch of lenders including Kiwibank which have picked the one-year term as being the place to price sharply. Kiwibank, HSBC, SBS and The Co-operative Bank all have sub 5% one year rates.
ASB is included in the graph is it clearly illustrates what average pricing. It hasn’t picked a term to compete on and sits in the middle.
PS: Since this graph was done ASB has increased its longer term fixed home loan rates.
