Rate cuts predicted amid intense bank competition
ASB has announced a significant reduction in its mortgage rates.
The bank has reduced its two-year fixed home loan rate by 30 basis points to 4.99%, its one-year rate by 24 basis points to 5.25%, and its three-year rate to 5.35%.
These cuts are part of ASB’s strategy to offer more affordable lending options, according to reports by 1News and RNZ.
Strategic reductions to foster homeownership
Adam Boyd (pictured above), ASB’s executive general manager, stressed the strategic nature of the rate cuts.
“We are serious about giving our home loan customers and first home buyers interest rate relief, and that commitment should be evident in our consistent rate drops across January and February,” Boyd said.
This approach aims not only to attract new customers but also to provide existing customers with opportunities to reassess and potentially refinance their current loans under more favourable terms.
Broader impacts on the market
ASB’s rate adjustments came swiftly after the Reserve Bank’s decision to lower the OCR to 3.75%, prompting a market-wide reassessment of lending rates.
ANZ was the first lender to cut its two-year fixed home loan rate to 4.99% right after the OCR cut. ASB then matched this rate, demonstrating the competitive nature of the market as banks quickly adjusted their rates in response to shifts in the OCR and competitive pressures, 1News and RNZ reported.
“Today's fixed-rate decreases will appeal to a broad range of Kiwis, with our sub-5% mortgage rate offering a strong medium-term option for people looking for added certainty,” Boyd said.
Adjustments beyond mortgage rates
In addition to mortgage rate reductions, ASB also adjusted its term deposit rates, with cuts ranging between five and 25 basis points.
This recalibration reflects a balancing act between attracting borrowers with low mortgage rates and retaining savers with competitive deposit offerings.
Outlook and predictions
Economic analysts suggested further rate cuts could be on the horizon as banks continue to vie for market share in a highly competitive landscape, RNZ reported.
“The two-year wholesale rate is currently 3.5%, so that’s a narrower margin to wholesale than we’ve seen in a long time. The flip side is that term deposit rates will likely fall below 4%, and soon,” said David Cunningham, CEO of Squirrel.
Shamubeel Eaqub, chief economist at Simplicity, commented on the potential for further rate reductions.
“If banks are willing to give up margin, rates could drop by up to one percentage point further,” Eaqub said.
Echoing the statement, Brad Olsen, CEO of Infometrics, added, “It’s likely that there might be some more downward pressure on rates as we move through the year.”
This competitive dynamic is poised to benefit consumers, potentially leading to historically low borrowing costs.
