Relief for homeowners: Banks cut mortgage rates in response to ...

Westpac was also passing on the full 50bps reduction to floating rates for home loan customers, and decreasing business and agribusiness lending rates.

BNZ cut its variable home loan rates by 50bps to 7.94%.

ANZ is passing on the full 50bps cut to both floating business and home loan customers.

The bank’s floating and flexible home loan rates dropped to 7.89% and 8% respectively.

ASB cut interest rates across personal, business and rural lending.

ASB’s variable home loan rate will fall by 50bps from 8.39% to 7.89%, while the Orbit rate drops from 8.49% to 7.99%.

Its business and rural floating base rate moves from 6.69% to 6.19%.

Before the RBNZ’s announcement this afternoon, ASB also cut some short and mid-term rates by up to 16 basis points.

ASB’s one-year fixed rate dropped 16bps to 6.19%.

Its six-month and two-year fixed rates both fell 10bps to 6.75% and 5.69% respectively.

The OCR cut drew favourable reaction from many of the country’s mortgage advisers and housing experts.

Nathan Miglani, senior mortgage adviser at NZ Mortgages, said the RBNZ’s move was “absolutely the best-case scenario”.

“Over the past few weeks, banks have been dropping their rates to 5.59%, and we are now hopeful to see 4.99% shortly.

“Homebuyers looking at upgrading the properties will benefit and so will property investors, who after the July changes to the Bright-line have been slowly coming back into the market.”

Miglani said it was also great news for first-home buyers, who will now benefit from lower rates.

“However, they will face stiffer competition when buying from property investors, especially under $750,000.

“It is looking like it will be a very busy year for the New Zealand housing market next year.”

Squirrel founder John Bolton said he expected one-year fixed rates to drop below 6% relatively quickly.

“With more aggressive rate reductions in the pipeline, it feels increasingly likely that we’ll receive another 50bps cut at our final OCR announcement of the year on November 27.

“The one-year swap rate is sitting at around 4%. But if things play out as expected, we could easily see one-year swap rates down close to 3% by the end of the year, which would translate into one-year fixed mortgage rates near 5.50%.”

Bolton said with rates now trending down again, borrowers needed to be both cautious and realistic about their expectations of a “good” rate in the current market.

“You don’t want to get caught in the trap of using the insanely low rates we saw during Covid-19 as the benchmark for comparison.

“The RBNZ has said that, moving forward, a ‘neutral’ OCR is 3%. That means that when we start to see rates around 5% – or indeed anything with a 4 in front of it – that’s going to be a pretty good deal.”

Ray White Group chief economist Nerida Conisbee said the cut would bring further relief to mortgage holders, who have had a particularly challenging time.

“Not only have mortgage repayments gone up dramatically, it has also been a difficult market to sell in with low levels of demand for property,” Conisbee said.

“The rate cut comes not a moment too soon, or perhaps a little late … Rates need to be cut further and quickly.”

CoreLogic NZ chief property economist Kelvin Davidson said the rate cut could produce a short-term lift in confidence.

“The OCR is now clearly on a steady downward path. In terms of the housing market impacts, the key point is that mortgage interest rates are likely to continue to drop too,” Davidson said.

“Looking ahead, it wouldn’t be a surprise to see limited growth in house prices in 2025, as mortgage rates drop. But keep in mind that lower rates will simply bring forward the timing for the debt-to-income restrictions to start biting; another reason to be cautious about the speed and duration of the next housing cycle.”

Money Sweetspot co-founder Meurig Chapman said the 50bps cut was “good news” — especially for first-home buyers.

“People have been doing it tough with the higher costs of living and mortgage rates,” Chapman said.

“For first-home buyers in particular, there is a real opportunity to look at buying an affordable first home again, while for mortgage holders coming off of a fixed rate, now is the time to shop around a little, talk to your bank, and negotiate hard.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.