The Bank of New Zealand has cut its fixed home lending rates to reflect uncertainty abroad.
BNZ chief economist Tony Alexander says the cuts are a sign that wholesale rates are coming down.
"Overall, the reductions in the fixed rates reflect a deteriorating outlook for world growth," he said. "Personally, I think there is a risk that things will get worse in that regard."
The bank cut its one-year fixed mortgage rate by 10 basis points to 5.75 per cent and its 18-month rate by the same amount to 5.89 per cent.
The six-month fixed rate fell by five basis points to 5.75 per cent, the one-year fixed by 25 to 5.85 per cent, and the two-year fixed by 21 to 5.89 per cent.
At the same time, the bank raised its floating lending rate by 15 basis points to 5.74 per cent, bringing it more in line with the market.
Alexander said the move to raise floating rates removed a discount that had been in place for some time.
"It also reflects the fact that everyone wants to go floating these days, so there is no need to be aggressively discounting one's product to attract people to it," he said.
"My belief is that Europe gets worse, the world gets worse, and we will see further downward pressure on fixed interest rates, but timing is the complete unknown."
But Alexander said that only a substantial deterioration in overseas market conditions would bring about a fall in local floating rates.
"We are still hopeful that growth in New Zealand will help to offset the effect that weakness in Europe is having."
The BNZ's move came at a time when the climate for Europe improved - for the time being - with major central banks acting in concert to bring down official interest rates.
The BNZ's moves follow closely on the heels of Reserve Bank data which showed that about $100 million in residential lending was in floating rate mortgages, with about $70 million in fixed, in October. The data supported evidence of the continuing trend away from fixed-rate mortgages over the past few years.
Of the sum in fixed lending in October, the Reserve Bank said $42 million was in one year, $20 million in two years and $7 million in three years.