Homeowners may feel relief after the Reserve Bank cut its official cash rate by 25 basis points to a record low of 2.5 per cent.
Most economists had expected the bank to cut its rate, but market pricing suggested that there was some difference of opinion.
ANZ Bank, New Zealand's biggest bank has cut its rates, reducing its floating home rate by 25 basis points to 5.74 per cent.
Interest.co.nz is reporting that Westpac has now followed, cutting its fixed and floating mortgage rates.
It's taken 15 basis points off its 2 Year Special Fixed Rate, taking it down to 4.24 per cent.
It's also dropped its floating rates by 15 and 25 basis points to 5.85 per cent.
BNZ has also dropped its interest rates in response to today's decrease in the OCR as follows:
• 20 bps off Standard - from 5.99% to 5.79 per cent
• 10 bps off TotalMoney - from 5.89% to 5.79 per cent
• 14 bps off Rapid Repay - from 5.99%to 5.85 per cent
BNZ Director of Retail and Marketing Craig Herbison announced the changes in the wake of the Reserve Bank signalling further OCR cuts are unlikely until 2018.
Kiwibank has now also moved, cutting its variable, revolving and offset mortgage rates have all been cut by 0.25 per cent to 5.65 per cent.
The Reserve Bank said growth in the New Zealand economy had softened this year, due mainly to lower terms of trade.
"Combined with increases in the labour supply from strong net immigration, the slowdown has seen an increase in spare capacity and unemployment," the bank said.
The New Zealand dollar rallied sharply after the rate was cut, gaining just over half a US cent to US67.30c on the news. "Basically, the Reserve bank cut its rate but essentially what they have signalled is that that is it for them," ANZ senior foreign exchange strategist Sam Tuck said.
Reserve Bank Governor Graeme Wheeler said the rise in the exchange rate was "unhelpful", adding that "further depreciation would be appropriate".
House price inflation in Auckland remained high, posing a financial stability risk, but there were early signs that Auckland house price inflation may be moderating, it said.
CPI inflation is below the bank's 1 to 3 per cent target range, mainly due to the earlier strength in the New Zealand dollar and the 65 per cent fall in world oil prices since mid-last year.
New Zealand's Official Cash Rate - 1999 - 2015:
The Reserve Bank said the inflation rate was expected to move inside the target range from early next year, as earlier petrol price declines will drop out of the annual calculation, and the lower New Zealand dollar will be reflected in higher tradables prices, it said.
"Monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target range," it said.