Co-op Bank undercuts majors
Kiwibank has nudged up its floating and revolving home loan rates, trimming a long‑standing pricing advantage over the big four banks and sharpening competition for rate‑sensitive borrowers.
The state-owned lender has lifted its variable home loan rate by 10 basis points to 5.75% and its revolving credit rate to 5.80%. The changes apply from 23 February, for new customers and from 9 March for existing borrowers.
The move is an out‑of‑cycle adjustment, not driven by an official cash rate change, and follows a period of weaker profitability and tougher competition in the floating‑rate market.
At its first meeting of 2026, RBNZ held the OCR at 2.25% and signalled the easing cycle is over, with the next move in rates likely up but not until the economy is more fully “mended”, keeping wholesale yields drifting lower for now.
Interest.co.nz notes that “Kiwibank's advantage has gone from double-digits to mostly small single digits, and is now largely irrelevant.”
Co-operative Bank emerges as clear floating-rate leader
Updated comparisons show Kiwibank now only slightly undercuts the major Australian-owned banks on floating rates. ANZ, ASB, and TSB are all at 5.79%, BNZ and SBS Bank at 5.84%, and Westpac at 5.89%.
By contrast, smaller rivals are substantially cheaper. The Co‑operative Bank is offering a market‑leading 4.99% floating rate, while Bank of China sits at 5.1% and ICBC at 5.39%.
“Clearly, if you are looking for a low floating rate, it is hard to go past the Co-operative Bank's current 4.99%. Kiwibank's previous 5.65% also came nowhere near that,” interest.co.nz says.
Margin pressure from broker-heavy distribution and savings moves
Analysts point out that Kiwibank’s earnings are “still well below major rivals” and that its distribution model weighs on margins, with around 90% of home lending estimated to run through broker or NZHL channels that attract commission costs.
On the savings side, Kiwibank has lifted its online call rate by 25 basis points to 1.5%. However, this remains below BNZ’s directly comparable rapid saver account, which pays 1.7%, underscoring the challenge of balancing funding costs, growth and competitiveness across both loans and deposits.
In Kiwibank’s recent economic commentary, economists Jarrod Kerr and Sabrina Delgado describe the recovery as in its “early stages”, and expect inflation to fall back to the 2% midpoint over the next 12 months, a backdrop they see favouring OCR hikes starting in 2027 rather than this year – suggesting floating rates may stay anchored for longer even as the bank’s own margins remain under pressure.
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