Kiwibank is cutting its variable lending rates by 50 basis points (bps) on the eve of the Reserve Bank’s next Official Cash Rate (OCR) decision.

The consensus among economists – including those at Kiwibank – is the RBNZ will cut interest rates by 50bps to 4.75% tomorrow.

Elliot Smith, Kiwibank’s chief customer officer – business banking, said it was responding early to that call.

“While controlling inflation is essential, prolonged high interest rates have heavily burdened businesses and households,” Smith said.

“Lowering rates quickly is crucial to provide much-needed relief for borrowers, so it is important Kiwibank, and the market, responds.”

Kiwibank said reducing its variable loan rates by 50bps will benefit 35,000 home loan and business banking customers.

Both Kiwibank’s variable and offset variable term loans will fall from 8.25% to 7.75%.

Its revolving loan drops from 8.3% to 7.8%.

Competition for mortgage lending has become competitive over the past two months as the major banks repeatedly cut fixed home loan rates.

This has seen mortgage rates drop to below 6% across a number of lending terms.

According to Interest.co.nz, ASB and BNZ have the lowest standard fixed two-year rates among the Big Five at 5.79%.

ANZ is offering a “special” two-year fixed home loan rate of 5.69%.

“The wholesale rates market (measured by overnight index swaps) has 44bps priced into the October decision – roughly 90% chance of a 50bps cut to 4.75%,” Kiwibank economists wrote last week.

“The November decision has another 48bps priced to 4.33%, so that’s most of a 100bps move to 4.25%.”

February was just as interesting with another 45bps priced in already.

“So traders are pricing in ‘odds on’ bets of 50bps cuts. The cash rate is priced to hit 3% by August next year, with a terminal rate around 2.5%, in line with our forecast.”

The RBNZ cut interest rates in August by 25bps to 5.25% – the first cut since March 2020.

Kiwibank, ASB and ANZ moved swiftly in lowering mortgage lending rates following that decision.

- NZ Herald