Here’s how much banks are secretly discounting their interest rates

Remember, banks might advertise one rate. But when you talk to your mortgage adviser or go into your bank app, they will sometimes offer a lower, discounted rate. 

Today’s discounts are very small. No major bank is discounting its 1-year rate. 

The discounts on the 6-month to 3-year rates are also small. Average out at 0% - 0.06%.

So if your bank advertises 4.49% for the 18-month rate, maybe you end up getting 4.47%. 

That saves $1 a week on a $500k (30-year) mortgage. Hardly worth celebrating. 

Because it’s hard to see these discounts, I like to show you the average rates my team at Opes Mortgages is getting from the banks right now: 

Which bank has the lowest interest rates (most of the time)?

You might have also seen that our Opes Economist, Ed McKnight, had this piece published by RNZ. 

He analysed which bank tends to advertise the lowest interest rates:

Since August 2023, across all home loan rate terms, Westpac has most often advertised the cheapest home loan rates.

It had the joint-lowest rates advertised 55% of the time. That’s where it had the lowest rate (but so did a few other banks).

And it had the strictly-lowest rates 19% of the time. That's where they were unmatched by other banks.

Compare that to BNZ. They were jointly lowest 43% of the time, but only strictly lowest 4% of the time.

But what about the 1-year term that some Kiwi borrowers prefer? 

Over this same period, Kiwibank was often the leader for the 1-year rate.

It had the lowest or co-lowest 1-year rate 65% of the time and the absolute lowest rate 17% of the time.

Though on this specific rate, BNZ and TSB were close behind.

While this is interesting, don’t just look at the interest rates when comparing banks.

Because, as I mentioned before, sometimes banks discount their rates. 

ANZ typically advertises the highest four- and five-year interest rates. 

That's because they don't release special 4 and 5-year rates. So if you just look online, ANZ looks more expensive. 

But if you are with ANZ and choose those longer-term rates, they will typically discount them to match the other banks.

It’s not just the advertised rate that counts. What matters is the rate you actually end up paying. 

So walking across the road and moving your mortgage to a different bank won’t always get you a lower rate. 

The mortgage moves Kiwis are making

Over the last week:

• I helped one borrower switched banks. They got a $6,100 cashback payment from their new bank. That’s literally ‘money in the bank.’
• Another investor wanted to buy a new home for their family. The bank declined their initial application. So we restructured a few of their other loans, using the Commitment Issues strategy. The bank said ‘yes’. They’re going to open homes this weekend to find their dream home.
• Another investor didn’t want to switch banks. So I talked to their lender and got them $1,200 ‘retention cash’. The bank literally paid them to stay (and not switch to another bank).

So if you’ve got an interest rate coming up for re-fix … or want to make some mortgage moves …

Hit reply and let me know your situation.

I’ll come right back to you to see if my team can help.

Cheers,

Pete