Kiwibank Slashes Home Loan Interest Rates, Predicts Further Drops Amid Decreased Wholesale Rates

Date Published: 15 January 2024

Key Facts

• Kiwibank is cutting a number of its home loan interest rates, with reductions across two, three, four, and five-year periods.
• These cuts are a result of a significant fall in wholesale rates experienced before Christmas and into early January.
• Financial experts predict further drops in fixed interest rates of between 0.5% and 1% by March are likely due to disproportionately high bank margins.
• Kiwibank is also reducing term deposit rates by between 10 basis points and 15 bps.
• There’s speculation that the Reserve Bank could move the official cash rate (OCR) earlier than predicted, with a potential reduction in May.

Article Summary

Kiwibank, one of New Zealand’s largest financial institutions, is reducing its home loan interest rates across several loan terms. Reductions include two to five-year special rates, as well as standard two-year fixed rates. These reductions are in response to a substantial fall in wholesale rates prior to the holiday season and into the beginning of the year.

Financial industry experts have provided insights indicating that this is only a part of larger potential reductions. Predictions suggest that fixed interest rates may drop rapidly, possibly falling between 0.5% and 1% by March. The perceived high margins maintained by banks are believed to be the driving factors behind these reductions.

Additionally, Kiwibank will be decreasing its term deposit rates by between 10 basis points and 15 basis points. There’s also market speculation about the Reserve Bank potentially moving the official cash rate (OCR) earlier than predicted, with expectations of a possible rate cut as early as May.

However, while this speculation persists, chief economist at Kiwibank, Jarrod Kerr, suggests that the Reserve Bank may want to see inflation running below 3% before implementing a cut. Presumably, this would provide clearer direction for the economy to help optimise these changes.

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