(File image) Photo: 123rf
Westpac is cutting mortgage rates, the first bank to do so after the Reserve Bank changed its stance on its interest rate outlook.
The one-year special rate fell 25 basis points to 6.89%, the six-month special rate fell 19 basis points to 7.05% and the 18-month special rate fell 10 basis points to 6.79%.
Standard rates will also fall by the same amount.
This comes after the central bank significantly softened its stance on Wednesday.
The central bank had considered raising interest rates in May but said this week that inflation was falling and it expected rates to be cut in line with that.
Members of the Monetary Policy Committee discussed the possibility that high interest rates are affecting the economy more than expected.
“We are at a unique stage in the cycle where some customers may be considering re-fixing at a lower interest rate from recent high rates,” said Sarah Hearn, general manager of product, sustainability and marketing at Westpac.
“We recognise that some customers are still reviewing their loan repayments following the historically low interest rates of recent years and may be concerned about rising costs.”
“We continue to proactively call mortgage customers who may be experiencing financial difficulties to ensure they are fully supported and understand their options.”
Meanwhile, ASB economists said the tide was turning on interest rates.
They said they expect the policy rate to be cut from November, but that it could come sooner.
He said short-term mortgage rates will fall in the second half of 2024, but significant further declines are unlikely because five-year fixed rates remain below their 20-year average.
Opting for a fixed rate is a trade-off between interest costs, interest rate certainty that comes with a longer term, the flexibility of a shorter fixed term and the possibility of interest rate easing in the coming years, they said.
“From RBNZ measures to renewed threats to the economic outlook, mortgage rates may fall further. However, economic conditions suggest that mortgage rates will settle in a range higher than the recent and historic lows recorded during the COVID-19 pandemic.”
“We encourage all borrowers to choose a strategy that suits their personal budget, including their tolerance for interest rate fluctuations, their need for flexibility, and their goal of minimizing interest costs.”