Beyond interest rates: Why "it depends" matters in mortgages

NZ adviser explores SBS Bank's 5.99% 3-year fixed rate

Beyond interest rates: Why "it depends" matters in mortgages

Every now and then, a lender comes out with a cracking deal. After surfing the net scrolling through comparison sites, the comparatively low rate flashes across the borrower's screen, and before too long, the questions come thick and fast.

“What do you think of this deal? Is it right for me?” they ask their mortgage adviser – who of course replies: “Well, it depends.”

This seemingly noncommittal answer might feel frustrating at first, but as any good mortgage adviser knows “it depends” can be worth its weight in gold.

“While the interest rate you get is important – especially in today's market – your structure and planning for what might be coming up for you is at least equally if not more important,” said My Mortgage’s Claire Williamson (pictured above).

“And while I might sound like a broken record sometimes, we spend our days giving advice around the best fit for our clients and often this can be quite different from person to person.”

SBS Bank’s 5.99% three-year fixed rate product

Williamson encountered a similar situation when SBS Bank offered a fixed rate of 5.99% for three years.

Effective from April 20, at the time of release it was 66 basis points lower than any main bank's carded offer and -20 bps lower than the Heartland Bank three-year rate, according to

According to’s research, the last time New Zealand had any home loan rate sub-6% was from Heartland Bank, and their 3-year rate of 5.95% that ended on July 27, 2023.

“We were getting so many enquiries about it. No other bank was offering a rate that low,” said Williamson, who recently clinched the coveted title of New Zealand Financial Services Group (NZFSG) Adviser of the Year - Regional.

“Many people are coming off fixed-rate mortgages at 3.25% and see the 5.99% rate at SBS and the 6.89% rate at another bank.”

Like clockwork, the phones began to ring.

”Where we arrived was that for the 5.99% to be competitive for the next three years, considering today's one year rate, we'd need to see an average of 5.50% across year two and year three,” Williamson said. “This might look like 6% in year two and just over 5% in year three.”

Three years can be a long time. With the consensus among economists being that the official cash rate will stay at 5.50% for the rest of the year before slowly tapering off, borrowers could end up locked in a rate that’s higher than the market.

“So, is it worth it? Perhaps annoyingly, it depends. But many people don't understand the implications of locking into a longer-term rate compared to other banks' products.”

Williamson said many people had asked her if their current bank can beat that rate, and the other banks simply weren’t offering anything comparable.

“If a mainstream bank, like one of the big five (Westpac, ANZ, BNZ, Kiwibank, or ASB), was offering this rate, it would be a different story. But that's not happening at the moment,” she said.

“This product is very attractive, but I wanted people to understand that if rates drop faster than expected, they could be locked into a higher rate for a longer period.”

The value of a mortgage adviser

The value of a mortgage adviser goes beyond analysing rates and mapping out scenarios. There are many other factors beyond an interest rate.

SBS Bank is an online bank with a limited physical presence. They have only 14 branches, mostly located in the South Island.

Williamson expressed concerns about their capacity to manage a significant influx of new clients since larger banks typically have more robust systems and processes in place to handle such situations.

“For example, if you're a business owner or need frequent access to a physical bank branch, SBS might not be the best option for you due to their limited branch network,” she said.

“However, if you work in a major city centre like Hamilton, Wellington, or Auckland, you can visit a branch in person. The decision depends on your individual needs.”

Of course, it’s a double-edged sword: the fact that SBS Bank has less overhead is one of the reasons it can offer lower rates that challenge the majors.

Williamson urged her clients to never forget that banks have teams of people researching how to get the best return on their money.

“Anything that looks too good to be true probably is. In this case, SBS Bank’s policy was right for many clients,” she said.

“It's just important to consider the whole situation, along with the pros and cons, before you lock it in.”