Mortgage wars: Westpac undercuts major bank rivals, lowers home loan rates again

The major banks have all been cutting their mortgage rates over the past week.

Westpac has cut its mortgage rates for the second time in three weeks, undercutting its rivals in the process.

The five major banks have all announced changes to their home loan rates in the past week.

The latest move gives Westpac the joint-lowest advertised special rates among the five banks over one- and 18-month terms and the lowest rates over three- and four-year terms.

The biggest change will be to its five-year fixed rate, dropping 40 basis points (bps) to 5.99% (special) and 6.59% (standard).

Westpac’s one-year fixed rate will fall 4bps to 6.85% (special) and 7.45% (standard), while the 18-month rate drops 14bps to 6.65% (special) and 7.25% (standard).

Sarah Hearn, Westpac New Zealand general manager of product, sustainability and marketing, said wholesale rates have fallen and the bank was passing that on to customers.

“This will be welcome news for customers due to refix their home loans in the near future,” Hearn said.

“While the shorter terms are very popular at the moment, some homeowners still prefer the option of locking in more certainty with a longer rate, and we’re pleased to now be offering a five-year advertised special rate below 6%.”

Westpac is also cutting term deposit rates for its eight-month to five-year offerings from between 10-30bps.

ASB joined the rate cut fray earlier this week, becoming the first major bank to have all its fixed mortgage rates at under 7% since June last year.

The six-month rate dropped 25bps from 7.14% to 6.99%, while the one-year fixed rate fell 29bps to 6.85%.

For a borrower with a $500,000 mortgage over 30 years, the drop in the one-year rate is worth about $20 a week.

ASB also dropped its five-year rate 40bps to 5.99%.

Last week ANZ, BNZ and Kiwibank also made changes to their home loan rates.

ANZ cut mortgage rates across all its standard fixed terms from six months to five years, along with some special rates.

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

Kiwibank lowered its fixed special and standard home loan rates across all its terms from six months to five years.

Kiwibank trimmed its one-year rate by 14bps to 6.85% (special) and 7.75% (standard).

Its six-month rate fell 20bps to 7.05% (special) and 30bps to 7.95%.

And BNZ lowered all its classic home loans by 16-30bps.

Its six-month rate dropped 19bps to 7.05%, while the one-year rate fell 29bps to 6.85%.

The latest home loan interest rate cuts come after Consumers Price Index (CPI) data showed inflation was falling back towards the Reserve Bank’s target of 1-3%.

Inflation was 3.3% in the year to June 30, compared with a 4% rate in the 12 months to the March 2024 quarter.

This followed a softer tone from Reserve Bank Governor Adrian Orr in his latest Monetary Policy announcement. While the OCR remained on hold at 5.5% – the eighth consecutive time – the monetary policy committee noted interest rate pain may be feeding through to the domestic economy “more strongly than expected”.

This was seen by economists as a more “dovish” stance from his previous comments.