Rate competition heats up as Kiwibank holds out
ASB has become the last of the big four Australian-owned banks to cut its fixed home loan rates, leaving only Kiwibank yet to make a move.
However, the changes do not create any new market-leading levels. As commentators noted, ASB’s adjustments appear to be “one step behind.”
The bank has reduced its one-year fixed rate to 4.49%, matching BNZ’s earlier move, which was quickly adopted by ANZ and Westpac. Its 18-month fixed rate has also been lowered to 4.49%, already available from Westpac. None of ASB’s other cuts are market-leading. ASB also reduced term deposit rates at the same time, interest.co.nz reported.
Westpac and BNZ set the pace
BNZ was the first major to shift to 4.49%, with executive Karna Luke noting the move represented nearly a 40% drop from the 7.35% peak of February 2024. For a borrower with a $500,000 mortgage moving from 5.19%, that cut equates to savings of more than $2,400 over the fixed 12 months.
Kiwibank now under pressure
Kiwibank is the only major lender yet to adjust its fixed mortgage rates. Until it does, its rate card remains the least competitive among the big banks.
Market watchers expect BNZ may make further cuts, given it led the way with the “hot” one-year rate but has not yet adjusted other fixed terms.
OCR decision looms
The rate changes come just ahead of the Reserve Bank’s upcoming official cash rate (OCR) review this week. Markets remain divided on whether the central bank will opt for a 25 or 50 basis point cut.
“With pricing currently pointing to more than a 25 bps cut but less than 50 bps, markets are essentially saying they don’t know. So 50 bps is just as likely as 25 bps in this pricing,” analysts noted.
Kiwibank economists have been vocal in calling for aggressive action.
“It’s really disappointing that we recorded this massive recession in 2024, and we’ve actually contracted further over the year,” said chief economist Jarrod Kerr.
Economist Sabrina Delgado added: “They have to really hit the accelerator and get to 2.5% really quickly. We’re saying they need a 50-basis point cut in their October meeting.”
Markets currently price in a total of 75 bps of cuts by February 2026.
TSB keeps two-year lead
Outside the big four, TSB continues to hold the market-leading two-year fixed rate at 4.49%, which remains 16 basis points lower than the equivalent offers from ANZ, ASB, BNZ, and Westpac, interest.co.nz reported.
What advisers need to know
For mortgage advisers, the latest shifts highlight three key points:
- ASB’s move brings it in line but not ahead of competitors, with no new market-leading rates.
- Kiwibank remains the outlier but may follow soon under pressure.
- OCR volatility means more cuts are possible, so fixed-term strategy and lender incentives remain critical for clients.
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