Mortgage wars: More banks cut home loan interest rates

The major banks have been shifting their home loan and deposit rates lower lately. Photo / Alex Burton

Two more banks cut their mortgage rates today after similar moves by rivals ANZ and Westpac in the past week.

The major banks have been shifting their home loan and deposit rates lower lately on the back of falling inflation and a softened tone from the Reserve Bank.

From Monday, Kiwibank’s fixed special and standard home loan rates will decrease across all its terms from six months to five years.

Kiwibank’s one-year rate will drop 14 basis points (bps) to 6.85% (special) and 7.75% (standard).

Its two-year rate falls 30bps to 6.49% (special) and 40bps to 7.39% (standard).

The six-month rate decreases 20bps to 7.05% (special) and 30bps to 7.95% (standard).

Kiwibank is also cutting its term deposit rates by 5-20bps.

Meanwhile, BNZ is trimming interest rates on all its classic home loans by 16-30bps.

The popular two-year fixed rate is dropping to 6.49%.

BNZ’s six-month rate dropped 19bps to 7.05% and the one-year rate falls 29bps to 6.85%.

On Wednesday, ANZ announced it was cutting mortgage rates across all its standard fixed terms from six months to five years, along with some special rates.

The biggest change was a 30bps drop to both its special and standard two and three-year interest rates.

The special three-year rate fell to 6.35% and the two-year rate decreased to 6.49%.

Among ANZ’s short-term options, its one-year special home loan rate dropped 29bps to 6.85%.

Last week Westpac also took the clippers to its fixed special and standard mortgage rates across its short-term offerings.

Westpac’s six-month, 12-month and 18-month terms all fell 10-25bps.

While markets have for some time been pricing in Official Cash Rate cuts for this year, recent inflation data and a monetary policy announcement have given them reason to price in even more aggressive reductions.

Consumers Price Index data shows inflation was 3.3% in the year to June 30 compared with a 4% increase in the 12 months to the March 2024 quarter.

The headline annual inflation figure came in below the RBNZ’s expectations of 3.6%.

And while the RBNZ kept the OCR on hold last week at 5.5% — the eighth consecutive time — it was more dovish in its tone.

The monetary policy committee noted risks that interest rate pain may be feeding through to the domestic economy “more strongly than expected”.

Former Reserve Bank head of financial markets Michael Reddell told Newstalk ZB the statement “was a real lurch”.

“It was very different in tone from the statement they brought out only six weeks ago, which was talking up possible rate hikes later this year and not even beginning to cut until August next year,” Reddell said.

“It’s all over the place, but a shift in the right direction.”