4 Mar 2024

ASB drops mortgage rates, follows Westpac and BNZ

11:42 am on 4 March 2024
ASB bank

File photo. Photo: RNZ / Marika Khabazi

ASB has reduced its home lending rates for a second time in the past week, matching drops from Westpac and BNZ in February.

The bank said its one-year lending rate had dropped 10 basis points from 7.39 percent to 7.29 percent, and its two-year lending rate had also decreased from 6.89 percent to 6.85 percent. ASB had also increased its 6-month term deposit rate by five basis points to 6.05 percent.

The changes followed ASB's 18-month mortgage adjustment on 27 February which dropped 26 basis points to 6.89 percent.

Executive general manager of personal banking Adam Boyd said ASB regularly reviewed its rates.

"The reduction to some of our key mortgage terms in part reflects how swap rates have responded to the Reserve Bank's decision to hold the Official Cash Rate (OCR) at 5.5 percent.

"We know that the rising cost of living is affecting our customers, and alleviating a bit of pressure will be welcome news for homeowners in the current environment."

Meanwhile ANZ's one-year fixed rate is now lower than the other main banks at 7.24 percent, and its two-year rate is 6.79 percent.

This followed Westpac reducing its fixed home loan rates of between 10 and 20 basis points on 9 February.

Its special fixed one-year lending rate dropped to 7.29 percent while its special fixed 18-month rate dropped to 6.95 percent.

Westpac NZ general manager of product, sustainability and marketing Sarah Hearn said customers may still be concerned despite its reductions.

"While we are reducing our rates, we acknowledge that customers may be re-fixing their loans from the historically low rates we have seen over recent years and may still be concerned about their increasing costs.

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

Westpac NZ also decreased term deposit rates by between 10 and 30 basis points on all terms between 12 months and five years.

BNZ dropped its fixed mortgage rates ahead of the Reserve Bank's OCR decision too.

Its one-year lending rate now sits at 7.29 percent and its two-year lending rate sits at 6.85 percent.

Bank competition helping drive interest rates lower

One mortgage advisor said competition between banks amid lower wholesale interest rates were key drivers of the downward trend in fixed mortgage rates.

Founder of mortgage advisory firm Squirrel, John Bolton, said banks were jostling for market share.

"I don't think banks really want to compete on pricing at the moment. They're struggling to maintain their levels of profitability," he said.

However, Bolton said the reality was banks were fighting to maintain the market share "at all costs", despite reduced profitability.

Last month, ASB announced an 11 percent drop in half-year profit, as it was hit by slower lending, reduced margins and higher costs.

Bolton said the rates that customers were receiving were lower than the rates being advertised by banks.

"Homeowners should definitely be shopping around for the best deal."

He said the housing market was "slowly" recovering and the Reserve Bank's decision to hold the OCR last week would help.

"It's by no means a hot market at all, but I think buyers are starting to feel a little bit more confident."