Two major banks have cut interest rates in recent days but economists say it’s not clear how much further retail home loan rates have to move.
ANZ on Tuesday cut its 18-month fixed rate special by 10 basis points to 4.89%. The six-month rate dropped by 20 to 5.29%.
Then on Wednesday morning, ASB cut a range of its fixed home loan rates by up to 20 basis points.
It was the bank’s seventh fixed rate mortgage drop of 2025.
Its six-month rate drops by 14 basis points to 5.45%, its one-year by four basis points to 4.95%, its 18-month rate by 10 basis points to 4.89%, its two-year by four basis points to 4.95% and its three-year by 20 basis points to 5.15%.
Jarrod Kerr, chief economist at Kiwibank, said the outlook for interest rates was not as clear as it had been.
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Wholesale rates had moved up a bit since the Reserve Bank’s latest official cash rate review. The fact that the decision to cut the rate by 25bps went to a vote and there had been commentary around inflation risks had made markets less convinced further cuts were coming. “They’re saying they’re going to feel their way through from now. That’s fine, I get it but the markets have taken that as a reduced likelihood of going to 2.75%.”
The two-year swap rate hit a trough of 3.05% and had lifted to 3.26%.
“I do think there’s more downside to retail rates across the curve but I admit we’re getting close to the endpoint.”
He said, if his forecast was correct and the OCR dropped to 2.5%, retail rates would have further to fall.
“If I’m wrong and they stop cutting at 3% then I think we’re pretty close to being done on the mortgage space.”
He said it had reached the point where forecasters were disagreeing over a difference of 50 basis points.
“This time last year, you had two calling for a 6% cash rate then you had Kiwibank calling for a 2.5% cash rate. That’s wildly, wildly different views…. Now we’re all arguing over 50bps so it’s not a massive thing and it just shows you that we are getting closer to the bottom.”
Infometrics chief executive Brad Olsen agreed rates could fall a bit further but that it was clear they were close to the lowest point.
“We have said that a number of times, of course, and so there’s a question mark on how much lower they will go.
“Given you’ve now seen more of a signal from the Reserve Bank we are close to the low point for the OCR, given you are seeing a bit more activity picking up in the broader housing market, there does become that feeling there’s not as much downside coming through.”
He said a lot could change based on global economic changes but households were increasingly locking in for longer, wanting more stability. “That suggests there are a few more adjustments to come through but most of the big bulky falls and cuts to interest rates have already emerged.”
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