Major bank announces latest cuts to home loans
Last week, the Reserve Bank of New Zealand (RBNZ) lowered the Official Cash Rate (OCR) by 25 basis points to 5.25%, prompting a swift response from lenders.
With the move being welcomed by both mortgage advisers and borrowers, some lenders have gone beyond the 25-basis-point decrease, offering even larger rate cuts to their customers as competition heats up.
Natalie Hughes (pictured above left), financial adviser – mortgages from Vega Group said it was exciting to see the different responses from lenders, and emphasised how crucial mortgage advisers are in the current environment.
“With lenders reacting differently to the recent OCR and other changes, it's so important to have a mortgage adviser by your side as one size doesn't fit all,” Hughes said.
ANZ NZ cuts home loan rates again
As a sign of the shifting landscape among NZ lenders, ANZ Bank New Zealand (ANZ NZ) announced today it would cut interest rates again for the fourth time in a month.
On July 18, ANZ made a 30-basis point drop on its two-year special rate to 6.49% p.a. and 29-basis point drop on its one-year special rate to 6.85% p.a.
This was followed by a 36-basis point drop on the three-year special fixed rate to 5.99% p.a. and a 15-basis point drop on the floating variable home loan rate to 8.49% p.a. on July 31.
At the same time, ANZ also dropped its business floating and business overdraft rates by 15 basis points to get ahead of the market, which anticipated the RBNZ’s cash rate cut on Aug. 14.
Minutes after the central bank made its decision, ANZ NZ further cut its floating and flexible home loan rates by 10-basis points to 8.39% and 8.50% respectively.
And today, the bank reduced its rates again, cutting its 1-year special home loan rate by 40 basis points to 6.45% per annum, and its 18-month special rate by 50 basis points to 5.99% per annum.
Grant Knuckey (pictured above centre), ANZ NZ's managing director for personal banking, said that the RBNZ’s decision to lower the OCR has created an opportunity to pass on these savings to customers.
"The Reserve Bank’s move, and the fall in wholesale interest rates as a result, gives us the chance to pass on these lower rates to customers," Knuckey said. He noted that the competitive environment in the market right now is beneficial for homeowners and first-time buyers alike.
"This is the first time ANZ’s 18-month special rate has been below 6% since October 2022," Knuckey said.
"Many people have fixed their home loans on shorter terms in the past few years – meaning those borrowers will soon be in a position to take advantage of lower rates."
How other lenders reacted
Kiwibank was first to react minutes after the RBNZ announcement, decreasing its home loan and business variable lending rates by 25 basis points.
ASB reduced fixed home lending rates by 10-34 bps across various terms. ASB's one- and two-year home loan rates fell by 26 bps to 6.59% and 5.99% respectively while the six-month rate was lowered by 10 bps to 6.89%.
The 18-month term was reduced by 34 bps to 6.15%. The variable home loan rate was cut by 25 bps from 8.64% to 8.39% while the Orbit rate dropped from 8.74% to 8.49%.
Westpac is decreasing its Choices Floating, Choices Everyday, and Choices Offset home loan rates, as well as Business Lending Variable rates, by the full cash rate cut.
In a similar situation to ANZ NZ, these reductions come on top of recent cuts to advertised fixed home loan rates since the beginning of July, prompted by declining wholesale rates.
Other lenders have also cut rates to be more competitive.
Basecorp, a non-bank lender, said it was pleased to be joining others in the industry in passing on the full OCR reduction to new and existing customers, across all products.
“As a floating rate lender, it's very satisfying to deliver this outcome to mortgage advisers and customers after the all too regular OCR hikes of the last few years,” said John Moody (pictured above right), chief financial officer of Basecorp Finance.
“While August's movement is just a start, we look forward to sharing further benefits of lower rates in the months ahead as rates normalise.”
Potential impact on property market
While lower mortgage rates typically stimulate buyer activity, the impact on the property market may be more complex.
According to Kelvin Davidson from CoreLogic, other economic factors, such as a softening labor market, could temper the stimulative effect of lower mortgage rates.
Additionally, debt-to-income ratio caps are likely to limit the impact of these lower rates in the medium term.
As competition among lenders heats up, mortgage advisers will play a crucial role in helping borrowers navigate the evolving landscape and secure the best possible deals.
