Photo: RNZ
All the major banks have announced reductions to their variable home loan rates in response to a drop in the official cash rate.
As widely expected and signalled, the rate was cut by 25 basis points, to 3.5 percent.
Commentators have suggested that the widespread economic turmoil sparked by US President Donald Trump's tariffs could lead to lower interest rates than might otherwise be the case.
Kiwibank said its variable term loan had dropped to 6.5 percent. ASB's was 6.64 percent and Westpac's choices floating was dropping to 6.74 percent.
ANZ's floating home loan rate drops by 20 basis points to 6.69 percent and ANZ's flexible loan drops to 6.8 percent.
BNZ is cutting its floating rates by 25 basis points.
Westpac general manager of product Sarah Heran said the bank had cut some variable rates by 2.1 percent over the current easing cycle.
"Lower interest rates should give consumers and businesses a confidence boost after several years of higher costs and interest rates," she said.
Westpac was also lowering the test rate it uses to assess whether borrowers can afford loans to 7 percent from 7.25 percent.
So far, banks have not moved on their fixed rates, although Squirrel chief executive David Cunningham said earlier a drop to 4.5 percent for a one- or two-year rate could be possible.
The Reserve Bank noted the tariffs in its update and said they would have a "significant negative impact" on global growth.
Kiwibank chief economist Jarrod Kerr said the OCR was likely to need to go lower than previously forecast, and that would mean lower retail rates for home loan borrowers, too.
"There's been a 4.99 percent out there that's got a lot of air time... rates are just going to be lower than where they are today. They've cut 25 today we think there's at least another 50 coming with the threat of another 100 coming and that's been priced into wholesale markets.
"I think we will see lower mortgage rates as these cash rates are pegged lower."
Banks acknowledged that falling rates were not positive for savers.
"We've supported them by holding back some of the previous OCR reductions on key savings products in the current cycle, and we encourage savers to talk to us if they're unsure what falling rates might mean for them," Hearn said.
BNZ chief economist Mike Jones said the message from the Reserve Bank was that it would cut the official cash rate as low as it needed to, to help offset some of the negative impacts that could come through from the tariff trade war.
"It's hard to hang your hat on a solid forecast but we think the OCR will bottom out below neutral, at 2.75 percent.
"The odds are, and the market is pricing, that is the way things are and the cash rate is going to fall further than the outlook was suggesting a week ago."
He said that would mean mortgage rates had further to fall. "The Reserve Bank has basically given the green light to keep pricing a terminal cash rate sub-3 percent."
Sharon Zollner, chief economist at ANZ, said there was still an element of "wait and see" but she said it was not difficult to imagine a scenario in which more cuts were needed.
"The Reserve Bank has the comfort of knowing that if things do go south, the market will price in more easing. That in itself will ease monetary conditions without them necessarily doing anything. They've kind of got that in their back pocket."
She said some of that effect had already happened because swap rates have fallen recently.
"The Reserve Bank didn't push back against that and did acknowledge downside risks to the medium-term inflation outlook."
