Two major banks have cut their home loan rates to below 3 per cent - a new record low for major banks in New Zealand.
But the move will be cold comfort for the thousands of Kiwis who have deferred payments on their mortgages because they can't afford them at the moment.
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State-owned Kiwibank announced late Thursday it would be cutting its one year fixed term rate from Monday to 2.99 per cent, down from 3.09 per cent.
In a statement, the bank said it was its first ever sub 3 per cent home loan interest rate.
Kiwibank general manager of product Nicole Pervan said the move was about providing value to customers.
"Customers with a fixed interest rate expiring within the next month are likely to roll onto a new interest rate 1 per cent lower than their current rate.
"On an average-sized loan this will reduce repayments [by] $50 to $70 which will go a long way at this time. Customers have the flexibility to pay off their loan faster or keep that money in their back pocket for a rainy day."
That move has been followed by ASB which has cut its two-year fixed term rate to 2.99 per cent, down from 3.49 per cent, effective from today.
Craig Sims, ASB executive general manager retail banking, said the reduced rate would help Kiwis manage their home loans during what has been a challenging period, as well as support others into homeownership.
"This has been a difficult time for a lot of our customers. While we have put in place a number of support options, including mortgage repayment deferrals and interest-only payments, we're continually evolving what we are doing to help Kiwis get through the impact of Covid-19. Offering this two-year special rate is part of that."
ASB chief economist Nick Tuffley said lower home loan rates would help boost the economy as it gets back up and running, following lockdown.
"The Reserve Bank has taken concerted actions to push interest rates down, and these are clearly bearing fruit by enabling mortgage rates to fall to even lower levels," Tuffley said.
Lower interest rates would put cash into people's pockets helping to stimulate and restart the economy, he added.
"Lower borrowing rates will also help to further alleviate any financial worries that borrowers may have."
But the rate cuts will do little to help those who have had to defer payments on their home loans.
As of an update posted yesterday on the New Zealand Bankers Association website 105,035 loans had been reduced or payments deferred on them totalling loans worth $36.9 billion.
Those loans include home loans, personal lending, credit cards and arranged overdrafts.
The bank interest rate cuts come ahead of the Reserve Bank's official cash rate review next Wednesday.
The OCR is already at a record low of 0.25 per cent with the central bank locking that rate in for at least 12 months.
But some economists are predicting the rate will be cut again this year and could go into negative territory.
A survey of financial experts by Finder found 45 per cent predict another cut this year although just 15 per cent expected it next week.
Oliver Hartwich, executive director of economic think tank the NZ Initiative, said: "a rate cut should be expected given New Zealand's rapidly deteriorating economic circumstances."
Brad Olsen, a senior economist at Infometrics, said that emerging pandemic developments mean the Reserve Bank may reverse its decision to hold the cash rate for an extended period.
"With economic conditions now far worse, we see there to be scope for a further [OCR] reduction in early Q3 , as the wage subsidy runs out and businesses see increased costs and survival pressures," he said.
Property prices are also expected to fall with the experts predicting an 8 per cent slump in Auckland and 7 per cent fall in Christchurch.
Despite the predicted house price slump the majority of experts surveyed did not think it was a good time to buy property.
Kevin McHugh, Finder's publisher in New Zealand, said job security remained key for first home buyers eager to pounce while prices were down.
"First home buyers with a secure job are being presented with a unique opportunity to enter the market sooner than expected," he said.
"But the combination of a looming recession, job cuts and no vaccine as of yet means it's shaky territory on the employment front."