A Nightmare For The Banks- As Predicted

Two months ago I wrote an article, followed by an interview on Interest.co where I predicted that a mortgage war nightmare would soon break between the banks. Higher interest rates makes people leave more in the bank and borrow less, so the banks end up with more cash not earning anything. Couple that with the restrictions imposed by the Reserve Bank and we have the perfect formula for a mortgage war to break out as competition to lend heats up.

See Youtube interview here:

http://www.youtube.com/watch?v=eCUnMGCIzgw

Interest.co confirmed this today:

Another main bank makes big cuts to its 4, 5 and 7 year fixed home loan rates; tweaks others lower to stay competitive

May 27, 2014

BNZ has updated its website with new lower fixed mortgage rates.
They have lowered their six month rate to 5.75%, down 10 bps from 5.85%.
They have also reduced their two year Classic fighting rate to 5.89%, down 6 bps from 5.95%.
Their four year rate is now 6.59%, down 60 bps from 7.19%.
Their five year rate has been lowered by 41 bps to 6.99% from 7.40%.
And their seven year fixed rate is now 7.45%, down 40 bps from 7.85%.
These changes are just the latest set of reductions by banks, and the pace of reduction is accelerating.

link:
http://www.interest.co.nz/news/70115/another-main-bank-makes-big-cuts-its-4-5-and-7-year-fixed-home-loan-rates-tweaks-others-l

 

I wrote this article in March, and here’s an extract:


Do Interest Rates Rises Really Matter?
13 March 2014
Extract:
“As banks must lend or go broke there can only be one outcome as a result.
A nasty squeeze on bank’s margins between what they pay to depositors and what they lend that money out at.
After all, banks are merely wholesale and retailers of money and the difference between the two is their profit.
It is therefore highly likely that there will be a break out of a further round of “mortgage wars” as banks vie with each other to attract borrowers.
For the next little while there will be some huffing and puffing but I am sure that “specials” will soon appear that will cut lending rates to close to what they were yesterday.”

link:
http://www.ollynewland.co.nz/do-interest-rate-rises-really-matter/6133/comment-page-1/#comment-16602

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