Comparing rates across the Tasman
For those who prefer floating mortgage rates, Australians seem to be getting a better deal.
While New Zealand’s (OCR) sits at 5.25%, with variable rates like ASB’s at 8.39%, across the Tasman, the Commonwealth Bank charges 6.34% and ANZ Australia offers 7.4%, despite the Australian cash rate being lower at 4.35%.
“It’s the floating rate that sees the most competition in Australia,” Squirrel CEO David Cunningham (pictured above) told RNZ.
Fixed rates less competitive in Australia
However, when it comes to fixed rates, New Zealanders may have the upper hand. Australian banks like Macquarie offer a two-year rate of 5.39%, and ANZ comes in at 6.54%.
In contrast, ANZ New Zealand’s two-year fixed rate stands at 5.69%, making fixed loans more attractive for Kiwis.
John Kensington, KPMG’s banking expert, suggested that these differences might reflect future borrowing costs.
“What they're thinking is maybe by then the rate they borrow at might have changed,” Kensington told RNZ.
Competitive pressures shaping mortgage markets
Cunningham explained that floating rates dominate Australia’s market, meaning banks focus their competition on these loans.
“Their 90-day wholesale rate is 4.45%, and the best floating home loan interest rates are around 6%, creating tighter margins on floating home loans.”
In New Zealand, though, fixed rates are more competitive, even though Cunningham noted, “fixed rates in New Zealand were still way higher than they should be” based on wholesale rates.
Margins wider on floating rates in New Zealand
Kiwis opting for floating rates may be paying more than necessary.
Cunningham highlighted that only 10% of New Zealand lending is on floating terms, yet these borrowers are paying significant margins.
“Kiwi borrowers are paying at least $400 million more interest on floating rate loans than what might be considered a fair margin,” he said, comparing the international landscape.
ANZ: Different rate environments shape pricing
ANZ attributes the differences between Australian and New Zealand mortgage rates to unique interest rate environments. The bank explains that comparing net interest margins (NIM) is a better approach to understanding rate differences.
“ANZ NZ division's net interest margin of 2.56% is comparable to ANZ’s 2.52% margin in Australia,” ANZ noted, adding that higher capital requirements in New Zealand help explain the slight difference.
Net interest margins: A key comparison
Research indicated that Australian banks had an average net interest margin of 1.85% last year, while New Zealand’s margin was notably higher at 2.34%.
As banks continue to adjust rates in response to fluctuating OCRs, these margins are a critical factor in determining the mortgage rates borrowers face in both countries, RNZ reported.
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