Westpac first major bank to start cutting mortgage rates again

Photo: ODT files
Photo: ODT files
Westpac is cutting some of its longer-term fixed special home loan rates, becoming the first major bank to do so since the Reserve Bank put a pause on official cash rate hikes back in July.

From Friday, Westpac’s special two- and three-year fixed home loan rates will drop 10 basis points (bps) to 6.99 percent and 6.75 percent respectively.

Its four-year fixed special will come down 6bps to 6.69 percent, while the five-year special rate drops 16bps to 6.49 percent.

However, Westpac’s short-term fixed special home loan rates over six months, one year and 18 months will all rise. Its six-month and one-year rate will both now sit at 7.39 percent.

Westpac is also lifting its one-year term deposit rate 10bps to 6.10 percent.

Sarah Hearn, Westpac New Zealand GM of product, sustainability and marketing, said changes reflected the bank’s varying costs of funding, with falling wholesale rates over the past month balanced out by strong competition for deposits.

“We’re working hard to support borrowers and savers, and we believe we offer good value on a range of home loan terms, including those who want to lock in longer-term certainty,” Hearn said.

“Our own data continues to show most customers are well-placed to manage the cost of living, which is encouraging. However, we know that some homeowners who are due to roll off their current rate may be facing challenges from rate increases. We encourage customers to talk to us early if they’re worried about their finances.”

Earlier this week Kiwibank announced it was increasing its short-term rates - with its six-month special rate jumping to 7.39 percent (from 7.25 percent) and its standard rate to 8.39 percent (from 8.25 percent).

Kiwibank’s one-year fixed special moved to 7.35 percent, up from 7.25 percent, while the one-year standard rose from 8.25 percent to 8.35 percent.

New Zealand wholesale interest rates have fallen sharply over the last month or so, suggesting mortgage rate cuts could be in store before long.

Two-year swap rates, which can influence mortgage rates, currently trade at around 5.075 percent, down sharply from 5.785 percent in early October.

Kiwibank chief economist Jarrod Kerr told The New Zealand Herald earlier this week “if the market is right, by this time next year, mortgage rates could be 50, 100 or 150 basis points below where they are now”.

The Reserve Bank will publish its quarterly Monetary Policy Statement (MPS) on Wednesday next week, along with its decision to hold, hike or cut the official cash rate.

The consensus among economists is that the RBNZ is done with rate hikes following the fastest interest-hiking cycle in New Zealand history - which saw the OCR shift from a record low at 0.25 to 5.5 percent in less than two years.