Kiwibank has announced it will be reducing its variable home loan rates by a significant 0.50%, ahead of the Reserve Bank’s OCR decision tomorrow.
The change means a variable term loan and an offset-variable term loan will sit at 7.75%, and a revolving term loan will sit at 7.80%.
“Kiwibank expects its interest rate reduction to result in total interest savings of $18 million per year for more than 35,000 Kiwibank business banking and home loan customers,” the bank said.
It comes as the Reserve Bank of New Zealand (RBNZ) is set to announce whether the Official Cash Rate (OCR) will be cut tomorrow.
Market commentators, including those from the big four Australian-owned banks as well as Kiwibank, have called on the Reserve Bank to cut the OCR by 50 basis points to help ease the economy.
A 50-basis point cut would move the OCR to 4.75%, its lowest level since March 2023.
Banks have been trimming their fixed mortgage rates in recent months.
Speaking about the variable rates cuts, Kiwibank Chief Customer Officer for Business Banking Elliot Smith said: “Kiwibank was established with the vision of offering New Zealanders a genuine alternative to the major banks.
‘Rise to the challenge’
“Our decision to cut variable loan rates by 0.50% highlights how New Zealand’s largest locally owned bank continues to rise to the challenge.”
He said controlling inflation was “essential”, but prolonged high interest rates had “heavily burdened” households and businesses.
“Lowering rates quickly is crucial to provide much-needed relief for borrowers, so it is important Kiwibank, and the market, responds.”
Smith said Kiwibank was responding early to calls for the OCR to drop.
“By taking the initiative we’ve laid the challenge to the ‘Big 4’ – it’s going to be interesting to see if, and when, they respond.”
Last week, Westpac said it expected the Reserve Bank would cut the official cash rate by 50 basis points to 4.75% at its October 9 review. It also expected another 50 basis point cut to 4.25% in November.
According to a a Reuters poll of 28 economists, 60% expected a 50-basis point cut with financial markets tipping that would be the case.
