Kiwibank has become the latest lender to further drop its rates, though major movements have eased off
New Zealand’s mortgage market is continuing to shift into a more borrower-friendly phase, with interest rates now showing consistent signs of softening across key terms.
Kiwibank has led the latest round of adjustments, and has trimmed several of its longer fixed-term rates.
As of May 5, the one-year fixed rates at most big banks – including ANZ, ASB, Westpac, and Kiwibank – have landed on a sharp 4.99%. The same goes for six-month and two-year terms. Kiwibank’s latest reductions mean it is now offering 5.35% for three years, 5.59% for four, and 5.79% for five. These drops bring it in line with what others have already rolled out.
Things have gone quiet lately in terms of big movements, according to a report by interest.co.nz, and banks are largely watching overseas trends while waiting on local signals – notably, the Reserve Bank’s next update on 28 May 2025.
Deals back on the table
For advisers, the ongoing market shift means that previously declined applications – especially those that failed stress tests or brushed up against tight credit policies – are now worth reassessing under softer lending criteria.
Satyan Mehra, director and chief adviser at iConsult, said this cycle of reviews and reworks actually began mid-2024, when rates first began to ease. At the time, his strategy shifted toward short-term fixes for clients in a position to take them.
Clients looking at restructuring or seeking more credit have also been revisited, and Mehra noted that reduced stress test rates have allowed more deals to move forward.
“Some lenders have dropped stress testing by approximately 1% in the last eight month period,” he told NZ Adviser.
“That’s a massive drop, and it has a massive impact on someone who may have a few million dollars worth of lending. Off the back of that, we’ve been very proactive in reviewing clients and looking at deals that were slightly shy of the finish line. We’ve found that a lot of deals that were an absolute no-go up to 12 months ago can now be revisited, and it’s given us a good pipeline.”
Kiwibank, ASB, Westpac and ANZ all dropped their stress test rates in February this year, following the Reserve Bank’s February OCR cut. Only BNZ’s stress test rate remained the same.
Mehra said that a loosening of LVR restrictions has also helped more borrowers return to the market, particularly on the investor side. Investor loans currently have a 5% limit for high-LVR loans with a less than 30% deposit, compared to 35% in 2024.
Owner-occupier loans are currently at a 20% limit for loans with a less than 20% deposit.
“Eased LVRs have helped, and we’ve seen investors back in the market and borrowing more money over the last six months,” Mehra said. “The restructuring opportunities have been massive.
“Finally, the CCCFA amendments have made things more realistic and mean that clients don’t need to count their cups of coffee.
“We’re often looking at a ‘shotgun’ picture because it looks like things will get better in the coming months. Overall it’s more reviews, more catchups, and increasingly looking at short-term positions.”
