Westpac New Zealand has dropped its short-term home loan rates as sentiment around when the Reserve Bank (RBNZ) will deliver its first rate cut since 2020 continues to shift.

From tomorrow, both Westpac’s fixed special and standard mortgage rates across its six-month, 12-month and 18-month offerings will fall between 10 and 25 basis points (bps).

The biggest drop will be to its one-year rate, dropping 25bps to 6.89% (special) and 7.49% (standard).

Westpac’s six-month rate will fall 19bps to 7.05% (special) and 7.65% (standard) and its 18-month rate will drop 10bps to 6.79% (special) and 7.39% (standard).

Yesterday, the RBNZ kept the Official Cash Rate (OCR) on hold at 5.5% for the eighth consecutive time. However, its “dovish” tone had markets picking an earlier cut to interest rates.

The Monetary Policy Committee noted risks that interest rate pain may be feeding through to the domestic economy “more strongly than expected”.

While markets have for some time been pricing in OCR cuts for this year, yesterday’s statement gave them reason to price in even more aggressive reductions.

“The committee’s messaging gives us greater confidence that the bank will commence its easing cycle in November,” said Abhijit Surya, Australia and New Zealand economist at Capital Economics.

“There were a few nuggets in [the] policy announcement that show that the bank is now one step closer to cutting rates,” he said.

Sarah Hearn, Westpac New Zealand general manager of product, sustainability and marketing said the rate changes would be welcome news for customers looking to refix their mortgage soon.

“We’re at a unique stage of the cycle where some customers may be looking to refix at lower rates from recent highs,” Hearn said.

“We do also acknowledge that some customers may be still refixing their loans from the historically low rates we have seen over recent years and may still be concerned about their increasing costs.”

Westpac will also make changes to a range of its term deposits, with rates dropping by between 5 and 10 basis points across its six- to 18-month options.

Hearn said the bank was continuing to proactively call home loan customers who may be facing financial difficulty.

“Our data shows most of our customers are coping well with higher living costs, but we encourage them to get in touch if they have any concerns.”