House prices have fallen about 5.5% since the peak in November, according to data from CoreLogic.

SUNGMI KIM / Stuff

House prices have fallen about 5.5% since the peak in November, according to data from CoreLogic.

Cashback is the new battleground for banks as interest rate volatility puts pressure on borrowers, brokers say.

Interest rates have risen rapidly over the past year as central banks around the world have tried to fight inflation.

The official cash rate rose from a Covid low of 0.25% to 2.5%, pushing home loan rates from around 2% to over 5% in some cases.

There was some respite as three banks cut their special two-year rates due to a drop in the cost of wholesale funding, but interest rate competition appears to be subdued.

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The TSB has ended its special rate of 4.85% and replaced it with a one-year offer at 4.99% for the next three weeks.

Spokesman Joe Bishop said the rate was lower than those offered by the big four banks – ANZ, ASB, BNZ and Westpac – and came at a time when many households are looking for ways to cut costs.

The big banks announce special rates between 5.25% and 5.35% for one year.

“If our customers are looking for a different home loan term, our new ‘higher rate’ offer will secure them a lower rate than any of the fixed home loan rates currently advertised nationally by ANZ, ASB, BNZ or Westpac.

“We know a lot of Kiwis right now are trying hard in an environment of rising prices and interest rates, so we want to make it easy for our customers to secure a competitive home loan rate and have some certainty. for the next year. ”

Banks vie for tighter mortgage market – Reserve Bank data shows there was $6.8 billion in new lending in May this year, down from $8.9 billion last May.

Data from the Real Estate Institute shows there were 38.1% fewer sales in June compared to the same month a year earlier.

RICKY WILSON/STUFF

Glen McLeod, Director of Edge Mortgages, explains why we should all be watching how banks test mortgage borrowers.

Broker Glen McLeod, of Edge Mortgages, said banks were the most competitive with cashback offers. Kiwibank and BNZ offer 1% – BNZ up to a maximum of $20,000. These are payments made to borrowers when a loan is taken out.

But he said they were less inclined to cut rates to get attention. “Nobody seems to be really pushing the boat right now with rates so volatile – they’re worried that if they cut rates and things change they’ll have to put them back on again.

“Lending is tight and service rates are higher and so it’s a tough time to be able to get approval at the moment. With house prices coming back, it opens up some leeway for first-time home buyers can buy, they will need to have everything in order along with their bank statements and expenses to be approved.

Lending market broker Bruce Patten agreed that cashback was at the center of the competition.

“It looks like they’re all suing the company, but with the illness they’re struggling a bit with the number of people away, so it’s an interesting time.”

McLeod said his own company had “never been so calm”. He said it seemed like people wanted to switch off after a few tough years.

Economists had predicted that the Reserve Bank might not need to raise the official exchange rate to the 4% it had forecast to bring inflation under control. But news last week that inflation had reached 7.3% caused some to reassess that forecast.

McLeod said he still expects to see a traditional spring campaign of interest rate specials. “Banks cannot continue indefinitely what they are doing.”