Westpac has cut its special 18-month fixed home loan rate by 0.26 percentage points to 5.19 per cent, becoming the cheapest of New Zealand's five largest banks for that term.
The new rate takes effect on Monday, 2 November, following the Reserve Bank's unexpected decision to leave the Official Cash Rate (OCR) unchanged at 2.75 per cent earlier this week.
According to Westpac, its 18-month rate was the lowest among the five major banks as of 1pm on Friday. Its existing two-year special rate of 5.29 per cent was also the lowest in that group.
The reduction provides an alternative for homeowners considering whether to fix their mortgage for one year or commit to a longer period. However, the bank has warned that its economists expect interest rates to increase over the coming year.
How the rates compare
According to figures reported by Newstalk ZB from interest.co.nz, ANZ, ASB and BNZ were offering special 18-month fixed rates of 5.29 per cent, compared with Westpac's new 5.19 per cent.
On one-year terms, ANZ and ASB had the lowest advertised special rates at 4.99 per cent. Kiwibank was offering 5.15 per cent, while BNZ and Westpac were both at 5.19 per cent.
Westpac's managing director of product, sustainability and marketing, Sarah Hearn, said the 18-month option could appeal to borrowers seeking greater repayment certainty beyond the popular one-year term.
She also encouraged customers concerned about meeting their financial commitments to contact the bank to discuss their circumstances.
Reserve Bank decision changes expectations
RNZ reported that financial market expectations had shifted following the Reserve Bank's decision not to increase the OCR.
Infometrics chief forecaster Gareth Kiernan said the decision could produce some easing in shorter-term mortgage rates because markets had largely expected an increase.
He said a sustained downward shift in market expectations for the OCR could also affect fixed rates of one year or longer, with relatively larger effects on shorter terms.
Not all economists welcomed the Reserve Bank's decision. BNZ head of research Stephen Toplis criticised the hold, warning that a weaker New Zealand dollar could add to inflationary pressure.
For homeowners, the advertised reduction does not automatically establish how much an individual household will save. Repayments depend on the loan balance, remaining term and applicable lending conditions.
Westpac says its rates remain subject to change, eligibility requirements apply, and a low-equity margin may be charged.
Borrowers will now be watching whether other major banks adjust their fixed rates in response to changing market expectations.
