Banks Cut Mortgage Rates Ahead of Reserve Bank Review
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- Major banks reduce mortgage rates ahead of Reserve Bank’s cash rate review next week
- ASB, BNZ, and Kiwibank announce significant drops in fixed-term home loan rates
- Economists predict a potential cut in the official cash rate later this year
Three major banks have announced further cuts to mortgage rates ahead of the Reserve Bank’s official cash rate (OCR) review next week. This move follows a recent trend in the market, which has seen home loan rates decline in recent months. Related: Southland Property Market Sees Surge in Listings and Inventory
ASB revealed a new “market-leading rate” of 6.25% for its two-year fixed term loan for customers with 20% equity. The bank’s 18-month rate drops from 6.69% to 6.49%, while the two-year rate falls from 6.49% to 6.25%. Additionally, longer-term rates have dropped below 6%, with the three- and four-year terms now at 5.99%. ASB also reduced some term deposit rates.
BNZ also announced reductions in its fixed-term home and term deposit rates. The bank’s classic home loan rates, available to customers with at least 20% equity, are now 5.99% for three- and four-year terms, 6.34% for a two-year term, and 6.49% for an 18-month term. The six-month term rate decreased from 7.05% to 6.99%. The standard home loan rates have also been reduced, with three- and four-year terms now at 6.59%, two-year term at 6.94%, and 18-month term at 7.09%. The six-month term is now 7.59%.
Kiwibank followed with its own announcement of new fixed special rates for customers with at least 20% equity. The bank’s new rates are 6.09% for three- and four-year terms, and 6.34% for a two-year term. The one-year term rate is 6.75%, and the six-month term rate is 6.99%. Kiwibank’s standard rates have also fallen.
This trend comes after the release of Stats NZ figures showing the annual rate of inflation has fallen to its lowest level in three years, with only a 3.3% rise in the 12 months to the June quarter, nearing the Reserve Bank’s 1-3% target range.
Bank economists are now predicting a cut in the official cash rate later this year. Wholesale interest rates have fallen recently in anticipation of the central bank loosening monetary policy.
BNZ has dropped almost all of its short-term fixed housing rates, with the most significant drop seen in longer-term rates between three and five years, now at 5.99%. Short-term rates from six months to two years have decreased by between six and 16 basis points. ASB has also lowered its fixed home rates, with all longer-term rates below 6% and the popular two-year rate now at 6.25%. Its term deposits between nine months and five years have dropped by up to 30 basis points.
Kiwibank has similarly reduced its special fixed term rates by between six and 30 basis points, with its two-year rate now at 6.34%. Most of Kiwibank’s term deposit rates have dropped by 10 basis points, with the one-year rate down to 5.65% and the two-year rate down to 5.25%.
The Reserve Bank of New Zealand (RBNZ) will meet on Wednesday, 14 August, to publish the monetary policy statement. The official cash rate has remained at 5.5% since May 2023, but banks predict potential cuts later this year, possibly in October and November.
Mandy Jordan from The Mortgage Supply Co. commented, “When we see rates drop, we see house prices increase. Right now, we are in the middle ground where we can take advantage of the current housing market and short-term financial strategies. Recent CCCFA rule changes have given banks more flexibility to lend. There are increased First Home Buyer incentives and offers. My advice: Act now! – Loan processing times have lengthened out, so start sooner rather than later. Get in touch, so we can review your personal situation and how you could take advantage of the current environment before the crowd joins the party.”