Westpac NZ is passing on today’s official cash rate reduction by the full 0.50% to floating rates for home loan customers, and also decreasing business and agribusiness lending rates.

The bank is also cutting fixed home lending rates by 0.10% p.a., which means it has now reduced its advertised 12-month home loan interest rate by a total of 0.95% p.a. since the start of July.

Westpac is also reducing savings rates along with some of its term deposit rates.

Westpac NZ General Manager of Product, Sustainability and Marketing Sarah Hearn says the bank is working hard to offer good value in a highly-competitive environment.

“Today’s OCR announcement is good news for housing, business and agri borrowers. We’re responding and passing on the benefits in a timely manner,” Hearn says.

“We’re also reducing our home loan serviceability rate to 8.15% to support New Zealanders looking to get on the housing ladder, while ensuring we continue to lend responsibly.

“We’re pleased to be delivering another rate cut for our home loan customers, and confidence boost we expect this will provide to households and small businesses. Westpac’s economists estimate that nearly half of all homeowners on fixed rates will have rolled onto lower rates by the end of the year.

“At the same time, we know many households are still facing cost pressures, while our savings customers will be watching falling interest rates closely.

“We continue to proactively contact home loan customers who may be facing into financial difficulty, and we encourage anyone who’s concerned about their financial situation to get in touch.”

Today’s cut in the Official Cash Rate is an early Christmas present for the retail sector, according to Retail NZ.

“We are delighted at the Reserve Bank’s decision to cut the OCR by 50 basis points to 4.75%,” Retail NZ Chief Executive Carolyn Young says.

“Coming at the beginning of Q4, this will be welcome news for retailers as they prepare to enter the period that is traditionally the busiest time of year for retail sales. Strong pre-Christmas sales are critical to retailers meeting their annual sales targets.”

Retail NZ is hopeful that today’s OCR announcement will turn around consumer confidence, which has been at prolonged low levels over the last couple of years. Improved confidence will help retailers, who have been suffering a continued downturn in sales.

"Around half of mortgage borrowing is now fixed or floating for six months or less," Finance Minister Nicola Willis said. 

"That is the largest amount since records began in 2017."

"What that means is a lot of people will have the opportunity in the next few months to switch to a lower interest rate, meaning that will free up more cash for many, and that cash will flow into the tills of local business and make a difference to our economy," Willis said.

Home buyers today are in a unique position considering the trajectory of house prices since the peak, says Daniel Coulson, Chief Executive Ray White New Zealand. 

They are presented with the opportunity to buy a home at today's price, but lock in the benefit of tomorrow’s interest rate. This opportunity only comes around once in a cycle and as buyers weigh up both the purchase price and the ongoing cost of ownership through borrowing, very rarely are purchasers presented with a win-win.

Sellers on the other hand can take a great deal of confidence in today's announcement as well. The last cut in August saw a spike in inquiry, inspections and auction participation, the reaction to this cut is likely to be the same, Coulson says.

"Today's 50 basis point interest rate cut is another sign that there are better times ahead for both property investors and renters," said Matt Ball, spokesperson for the NZ Property Investors' Federation.

“To be clear, a lower cash rate today doesn’t mean rent cuts tomorrow – that's not how things work. Many of our members are on fixed rate mortgages so it will take time for the OCR cut to filter through.

“However, lower interest rates and the changes the Government is making to the rental sector will make it more attractive for people to invest in it. This will increase the supply of rental property, and increased supply will give renters more choice at a better price.

“We are starting to see signs of investors getting ready to get back into the market.

"Interest rates are falling, banks are keener to lend, interest deductibility is returning, and positive changes are being made to the Residential Tenancies Act, so there's a better environment for people wanting to get into the business of providing rental accommodation.

“There are still bargains to be had in the property market, particularly for investors ready to put in the hard work and add value to their investment by renovating the properties they buy.

“On the downside, other costs like rates, insurance and maintenance are still high, it’s a tenant's market and rents are static, so anyone getting into the business must ensure the numbers add up.

“We get the feeling that cashed-up investors will be first off the block, while newer investors, who are more reliant on borrowing, may wait for interest rates to fall further.

“It's looking like 2025 could be the year when things really start to pick up,” he said.

On growing unemployment and scores of business closing, Willis said the coalition government had "always been up front" and had inherited an "economy in trouble."

Willis said there had been many years of a cost of living crisis and inflation out of control.

Now we were seeing green shoots, she said.

"I think this is going to have a very quick impact on New Zealand mortgage holders.

Speaking to reporters this afternoon, Finance Minister Nicola Willis said today's official cash rate decision was "fantastic news."

"Double whammy, double happy," she quipped.

Willis said it was a sign inflation was coming under control which was what was need to take control of the cost-of-living crisis.

"With inflation under control, interest rates can come down and that is going to make it cheaper for mortgage holders, businesses investing, for anyone who has got borrowing. This is good news for economy. It will help boost confidence."

 ANZ Bank New Zealand has announced cuts to its floating business and floating home loan interest rates following the decision by the Reserve Bank of New Zealand to cut the Official Cash Rate by 50-basis points. 

The full 50-basis point cut has been passed on to ANZ NZ’s Business Floating loan and Business Overdraft base rates. 

ANZ NZ Managing Director for Business and Agri, Lorraine Mapu, said: “While consumer and business confidence is improving, it remains a very challenging economic environment and the effects of high inflation and interest rates are still being felt.” 

“Today’s move by the Reserve Bank to drop the OCR to 4.75% will be welcome news to many of our customers.” 

Mapu said most of ANZ NZ’s business and agri customers were on floating rates so the changes should flow through to them relatively quickly, giving some debt relief and helping with cashflow. 

“Since interest rates started to drop – both wholesale and more recently the OCR by a total of 75-basis points – we have announced 80-basis points in cuts to our business and agri customers. 

“We hope this provides some relief to Kiwi farms and businesses that have been doing it tough in the current environment,” Ms Mapu said. 

ANZ NZ has also passed through the full OCR cut to its Floating and Flexible home loan rates, taking them to 7.89% and 8% respectively. 

ANZ NZ Managing Director for Personal, Grant Knuckey, said while they made up a small portion of ANZ NZ’s home lending, homeowners who have floating rate loans would be the first to feel the benefits of the falling OCR. 

“Passing on the full 50-basis points cut will immediately benefit homeowners who have all or part of their loans on floating rates.” Interest rates will continue to be reviewed in response to international and local market conditions. 

“As the overall interest rate environment heads down, customers who are due to refinance their fixed-term loans over the coming months will see their interest costs come down too,” Knuckey said. 

“We’ll always endeavour to provide the best rates for our customers. As people navigate the changing interest rate environment we encourage our home loan customers to connect with the bank to ensure they are aware of all the options available to them.” 

Knuckey said when reviewing interest rates, the bank considered a range of factors, including the OCR and changes in wholesale interest rates and the need to balance the needs of borrowers and savers. 

In response to the drop in the OCR, ANZ NZ will decrease the Serious Saver rate by 50-basis points, taking it to 3.75%. Online Call and Business Premium Call will also drop by 50-basis points to 2%. The new rates will be effective from the following dates: 

• Business Floating base interest rate: New loans 15 October 2024, existing loans 22 October 2024 
• Business Overdraft base interest rate: 22 October 2024 
• ANZ Floating Home Loan interest rate: New loans 15 October 2024, existing loans 22 October 2024 
• ANZ Flexible Home Loan interest rate: 15 October 2024 
• Serious Saver interest rate: 1 November 2024 
• Online Call and Business Premium Call: 22 October 2024
  

LJ Hooker group head of Network NZ Campbell Dunoon welcomed the move, noting that the reduction in interest rates is already positively impacting the property market.

"With two consecutive rate cuts, we’re seeing a significant uplift in buyer activity and confidence. More people are attending open homes, and there has been a noticeable increase in auction participation across the country," Dunoon said.

Dunoon added that while buyer interest is rising, it has not yet resulted in substantial changes in property prices. According to the latest CoreLogic data, property prices remain relatively stable, with the median house price down by just 0.5 percent in September compared to a year ago.

"This stability suggests that, while more people are ready to make purchasing decisions, the market is still benefitting from balanced conditions that are essential for sustainable growth. The stability in property prices and reduced interest rates create better opportunities for first home buyers wanting to enter the market," he said.

"These rate cuts have provided much-needed relief for borrowers, making homeownership more accessible and giving those on the fence the confidence to take action," Dunoon said.

Dunoon noted that lower interest rates could also benefit property developers, helping to add more housing to the market.

"While the property and rental markets are currently stable, changes in economic conditions and a growing population could lead to a shortage of stock. Stats NZ data shows that only 33,632 new homes were consented in the year to the end of August 2024, a 20 percent decrease compared to the previous year," he said.

"With the reduction in the bright-line test, decreasing mortgage rates, and the government's new support programme for residential construction, developers are likely to be more motivated to invest in new builds, helping to grow our housing stock.

With today’s RBNZ decision, Dunoon expects to see improvements to the property market.

"We expect that the combination of improving economic indicators, steady property prices, and lower borrowing costs will continue to provide opportunities for buyers and sellers alike, fostering a positive outlook for the property market as we move into the warmer months."