Heartland Bank releases NZ’s first sub 2 per cent mortgage rate

Heartland Bank has released the lowest home loan rate in New Zealand history.

The bank today announced a one-year fixed loan rate at 1.99 per cent.

To be eligible for Heartland Home Loans, customers must be refinancing or purchasing a standalone house on a single section in a major New Zealand centre, have a deposit or equity of at least 20 per cent and intend to live in the home.

In addition to this record-low rate, Heartland is also offering a fixed two-year rate of 2.35 per cent and a three-year rate of 2.45 per cent.

With the Official Cash Rate currently sitting at a record low of 0.25 per cent, banks have been dropping their home loan rates lower and lower.

Heartland Bank chief executive Jeff Greenslade attributed the bank’s digital strategy.

“Digitalisation means a low cost of onboarding, which can be passed on to borrowers. It also means speed – an answer can be given in minutes, so customers don’t have to endure the lengthy processes of mainstream banks,” Greenslade said.

“Moreover, Heartland’s group structure provides it with broad funding flexibility.”

Heartland says that this offer will only be available for a limited time.

This will no doubt place added pressure on the nation’s other banks to also drop their home loan rates.

SBS bank has also upped the competitive stakes with a rate of 2.49 per cent for18 months, two years or three years.

The smaller banks appear to be taking the fight to the bigger banks, which all currently have higher interest rates.

ANZ, ASB, BNZ, Kiwibank and Westpac are all currently advertising a fixed one-year rate of 2.55 per cent.

The question now is whether one these banks will join the competitive tussle and also drop their rates.

Owen Vaughan, editor of NZME-owned listing OneRoof, said:

“Homeowners are reaping the huge benefits of low interest rates and intense buyer demand post Covid-19, with several billions of dollars’ worth of real estate being traded since May.

“Agents are regularly seeing properties sell well above their own appraisals, never mind out of date CVs. The speed of the market is putting buyers to the test and mortgages are taking longer to process. Lower rates will add fuel to the fire.”

Things to consider before switching

Record low mortgage rates and cashback promotions can be very appealing for those thinking about switching.

However, there are a few factors homeowners should consider before taking the plunge.

John Bolton, head of Squirrel Mortgages, has previously told the Herald that Kiwis need to crunch the numbers before switching.

“It is very rare these days for it to make financial sense to break a loan,” Bolton said.

Bolton said rates falling to new lows won’t help people who fixed a year ago when they were around the high 3s or early 4s.

“Rates going lower just makes it worse for them.”

“My advice is you have just got to hang out and wait for your fixed rate to roll over.”

Break fees are calculated using a complex formula which is slightly different for each bank.

It basically works out how much a bank will be out of pocket by not having the interest you agreed to pay them as part of the fixed term agreement.

Banks are not allowed to make money off break fees but are allowed to ensure they aren’t out of pocket.

Borrowers can find out exactly what the break fee will be by contacting their bank although mortgage brokers and interest.co.nz offer break fee calculators that can give a guide.

– More to follow

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