Fixed mortgage rates fall ahead of inflation data
In a response to last week’s official cash rate (OCR) cut, Kiwibank has announced reductions across several fixed home loan rates, joining ANZ in making preemptive adjustments ahead of the next round of inflation data.
The Kiwibank changes take effect today, aligning with broader industry movements following the Reserve Bank’s (RBNZ) decision to lower the OCR by 25 basis points to 3.5%.
Kiwibank’s standard six-month fixed rate will drop by 16 basis points to 6.39%, while the special rate for the same term will decrease to 5.49%, 1News reported.
The one-year standard fixed rate will be reduced by 20 basis points to 5.89%, and the special one-year rate will fall to 4.99%. Other fixed term rates remain unchanged, with special rate eligibility requiring at least 20% equity.
Term deposit rates adjusted across the board
In addition to mortgage rate cuts, Kiwibank has revised its term deposit offerings, reflecting the lower interest rate environment.
The 90-day and 100-day deposit rates will drop to 3.50%, each reduced by 25 basis points. The 120-day rate moves to 3.70%, and the 150-day term is set at 3.95%.
Both six-month and 200-day terms will fall to 4.10%, while nine-month and one-year deposits are now offered at 4.00%, all trimmed by 20 basis points.
Longer-term deposits, including two- and three-year rates, will also decline to 4.00%, with four- and five-year rates settling at 4.20%, 1News reported.
ANZ sets the pace with deeper cuts
ANZ, New Zealand’s largest bank, led the rate reduction trend earlier this week, RNZ reported.
Its six-month fixed rate fell by 40 basis points to 6.09% for standard borrowers and 5.49% for those eligible for the special rate. The one-year and 18-month special rates dropped to 4.99%, aligning with the most competitive offers in the market. The standard one-year rate declined to 5.59%.
Squirrel CEO David Cunningham recently suggested that a 4.5% mortgage rate is now within reach, as softening inflation expectations and global trade disruptions reshape the economic outlook.
Economists see further rate cuts ahead
Economists across the board are now forecasting deeper OCR cuts, RNZ reported.
Kiwibank analysts anticipate the cash rate may drop to 2.5%, while ASB predicts a 2.75% trough. These forecasts are informed by a weaker-than-expected economic backdrop and escalating global uncertainty, particularly driven by new US trade tariffs.
ASB economists expect that the upcoming inflation report will confirm that price pressures remain subdued, giving RBNZ more room to ease further.
Westpac chief economist Kelly Eckhold noted that lower wholesale swap rates make further reductions in fixed mortgage rates likely but cautioned that volatility remains a concern.
“You don’t want to reduce your mortgage rate today and then have wholesale rates up 30bps tomorrow and you have to change your rate again,” Eckhold said.
Outlook: A more competitive lending landscape
As banks begin to adjust to lower funding costs and rising economic risks, borrowers may benefit from increasingly attractive fixed-term rates.
With OCR projections trending lower, more cuts to home loan rates may be on the horizon, potentially opening up new opportunities for homeowners and first-home buyers looking to secure better deals in a shifting market.
Read more about the Kiwibank and ANZ rate changes.
