NZ's largest bank cuts home loan rates as inflation dips

The country's largest bank will drop its home loan rates as the latest data shows the rate of inflation dipping.

The ANZ changes will be effective from tomorrow.

The standard rate for a two-year fixed-term home loan with the bank will be cut by 30 basis points from 7.39% to 7.09% per annum. The special rate would be 6.49% per annum.

The same 30 basis point drop would apply to a three-year fixed-term.

The standard rate for a one-year fixed-term home loan would be reduced by 29 basis points from 7.74% to 7.45% per annum. The special rate would be 6.85% per annum.

ANZ has also decreased term deposit rates between 10 and 30 basis points for terms six months and longer in response to "recent decreases in wholesale swap rates and the reduction in home loan rates".

The bank's personal banking managing director Grant Knuckey said inflation hadn't yet been beaten amid a softening tone from the Reserve Bank and today's inflation data.

"The New Zealand economy is still doing it tough and global markets remain volatile due to geopolitical tensions," he said.

"But, following the official cash rate announcement last week, we've seen a drop in wholesale rates so we're able to pass on savings to our customers.

"For borrowers, we know every dollar counts; so hopefully lower interest rates will provide some relief and support for customers.

"In recent years many people have typically fixed their home loans on shorter terms. That means many will soon be in a position to take advantage of these lower rates."

The change follows the release of Stats NZ figures showing the annual rate of inflation has fallen to its lowest level in three years, with only a 3.3% rise in the Consumer Price Index in 12 months to the June quarter — close to the Reserve Bank's 1-3% target range.

Banks are now predicting a cut in the official cash rate as early as August after the drop.

ANZ economists had previously forecasted interest rate cuts would start from February.

But in a research note released today, it said: "We have brought forward our forecast timing of the first 25bp [basis point] cut in the official cash rate to November, rather than in February."

It said the fall was more likely to come earlier than later and that it then saw a series of cuts to follow, all the way down as far as 3.5%.

ASB went further, saying: "The remaining OCR decisions over 2024 are effectively 'live' and cuts could start as soon as next month."

Kiwibank gave its assessment: "We still think inflation is on track to fall below 3% in the current quarter. And today's progress on core inflation has us growing in confidence that the RBNZ's 2% target will be achieved in 2025. Rate relief is on its way."

The Reserve Bank has been aggressively taming inflation and spending in the economy, over the past two years, by hiking the official cash rate and interest rates.