Rate cuts bring relief to thousands of borrowers
ASB has dropped four of its fixed home lending rates, joining ANZ, BNZ, Kiwibank, and Westpac in making cuts ahead of this week’s official cash rate (OCR) decision by the Reserve Bank.
Economists overwhelmingly expect RBNZ to cut the OCR by 25 basis points in August, with further easing likely into early 2026 as inflation remains contained and employment softens.
Effective immediately, ASB has reduced its six-month fixed home lending term by 17 basis points from 5.29% to 5.12%. Its one-year and 18-month terms have both dropped 10 basis points to 4.79%, with all major banks now offering 4.79% for one-year terms. The two-year rate fell 6 basis points from 4.95% to 4.89%, 1News reported.
The bank, which reported a 1% fall in cash profit to $1.35 billion for the year to June and saw home lending grow 7%, business and rural lending rise 2%, and customer deposits lift 4%, also trimmed some term deposit rates by between 5 and 15 basis points.
Lower rates to help thousands of borrowers
“We’ve got tens of thousands of customers due to refix onto lower rates in 2025, and we know any rate reduction is going to help these households, with savings they can put towards other important things,” said Adam Boyd (pictured), ASB executive general manager personal banking.
“By Christmas, around 90% of customers holding a fixed home loan are likely to be on a rate less than 6%.”
Impact for savers and the broader market
Economist Cameron Bagrie told 1News that while the latest rate drops were positive for buyers, they came at the expense of savers.
“Banks are trimming rates on both sides of their balance sheet. Term deposit rates have been coming down and in line with mortgage rates. So, there’s some winners out there and there's some losers on the other side,” Bagrie said.
“We’ve seen green shoots, but green shoots sometimes turn brown, and there’s a lot of global uncertainty at the moment.”
RBNZ tipped to cut OCR to 3% this August
The moves come as a Reuters poll showed over 90% of economists expect RBNZ to cut the OCR by 25 basis points to 3% on Aug. 20, amid contained inflation of 2.7% and a rising unemployment rate of 5.2%, the highest since late 2020. While some banks, including ASB and Westpac, expect no further cuts after August, others forecast the OCR could drop as low as 2.5% in 2026.
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