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Westpac is reducing its home loan interest rates, becoming the first bank to respond after the Reserve Bank adjusted its outlook on the official cash rate.
The one-year special rate is now 6.89 percent, down by 25 basis points; the six-month special rate has dropped 19 basis points to 7.05 percent; and the 18-month special rate has decreased by 10 basis points to 6.79 percent.
Standard rates will also decrease by the same margins.
This decision follows the Reserve Bank’s softened stance announced on Wednesday.
Although the Reserve Bank had considered raising the official cash rate in May, this week it noted that inflation is declining and it anticipates interest rates will decrease accordingly.
Monetary policy committee members discussed that high interest rates might be impacting the economy more than anticipated.
“We’re at a unique stage of the cycle where some customers may be looking to re-fix at lower rates from recent highs,” said Sarah Hearn, Westpac’s general manager of product, sustainability, and marketing.
“We also acknowledge that some customers may still be re-fixing their loans from the historically low rates seen in recent years and may be concerned about rising costs. We continue to proactively reach out to home loan customers who may be facing financial difficulties to ensure they are well supported and understand their options.”
Meanwhile, ASB economists noted that the trend for interest rates is changing. They expect the official cash rate to be cut from November, or possibly sooner. They predict that short-term mortgage rates will decline later in 2024, but substantial decreases are unlikely as rates for up to five-year fixes are already below the 20-year average.
They highlighted that choosing a fixed rate involves balancing the cost, the certainty of longer-term rates, the flexibility of shorter fixes, and the potential for future rate decreases.
“Mortgage rates could dip lower due to various factors, including actions by the Reserve Bank or renewed economic threats. However, economic conditions suggest that mortgage interest rates will stabilize at a higher range than the recent and historic lows seen during Covid-19.
“We advise all borrowers to select a strategy that suits their personal budgets, tolerance for changing interest rates, and need for flexibility, alongside the goal of minimizing interest rate costs.”
SOURCE: RNZ