BNZ has lowered its standard two-year fixed rate 7.49 per cent and its three-year fixed rate to 7.39 per cent, while ASB has decreased its two-year rate to 6.89 per cent; and its three-year rate down to 6.75.
These decisions come after ANZ, the country's biggest lender, cut some lending and deposit rates earlier this week because of a fall in wholesale rates, which partly fund banks' lending.
BNZ also lowered special mortgage deals, and ASB has also lowered some of its long-term deposits.
ASB senior economist Mark Smith said the falls in wholesale and then retail rates broadly reflected the slowing in global and local inflation, which was raising confidence that central banks would also be cutting their benchmark rates.
"Over the past couple of months we've signs that inflation is cooling a bit faster than central banks have been expecting, which has been flowing through into lower wholesale interest rates, and in turn we're seeing pressure on people (banks) to lower their mortgage interest rates."
An example of the fall in wholesale rates is two year swap rates, a key influence of local mortgage rates, which have fallen one percentage point (100 basis points) since peaking in October.
Smith said any concerted bid by retail banks to drive rates lower would not be welcomed by central banks, which have been relying on higher rates to curb inflation, consumer spending, and inflation.
"I think central banks will send a strong message that 'we don't want to see borrowing costs move too quickly because that will undo what we're trying to do'."
He said a future fear for central banks would be that lower rates would refuel the housing market although the Reserve Bank (RBNZ) had a further tool in the wings to use next year in the form of debt-to-income ratios (DTI), which match the amount of lending to borrowers' incomes.
The Reserve Bank in November kept the official cash rate at 5.5 per cent, where it has been since May, repeating that inflation was slowing under the pressure of its rate rises, but was still too high.
This story was first published by RNZ
