Banks have already started to cut their interest rates. Photo: RNZ
Banks had already started to cut their interest rates, ahead of an expected drop in the official cash rate (OCR) on Wednesday.
On Wednesday morning, ANZ was offering app users 4.89 percent for one year, 4.85 percent for 18 months and 4.92 percent for two years.
The Reserve Bank on Wednesday cut the OCR by 25 basis points to 3.25 percent and indicated two more cuts were possible.
After the announcement, ANZ also said it was cutting its floating home loan, floating business and savings rates.
Its floating and flexible home loan rates dropped by 20 basis points to 6.49 percent and 6.6 percent, respectively.
Westpac said it was cutting its rates to 4.95 percent across one-, two-, and three-year terms.
Westpac general manager of product, sustainability and marketing Sarah Hearn said it made it easy for customers to split their rates.
It will also drop its variable home loan rates by 15 basis points.
Kiwibank and ASB were cutting their floating rates, although also not by the full 25bps.
She said Westpac was cutting its test rate, which it uses to assess whether buyers can afford their loans, to 6.85 percent from 7 percent.
Mortgage adviser Glen McLeod said with the prospect of another couple of 25bp rate cuts being discussed by economists, borrowers were having to decide whether to fix or wait.
"If we do wait, are we going to get much more?"
The margin banks were making on their rates had dropped, McLeod said.
He said he had been advising some clients to stick to discounted floating rates for a little bit longer.
"It's usually the week after the OCR that we see discounted rates starting to show. This is the first time in a while that we've seen them start to drop rates before."
But Shamubeel Eaqub, chief economist at Simplicity, said the margin between two-year retail rates and wholesale rates had increased.
"It's now about 200 basis points, when we have a mortgage war it's down around 100. My sense is that if we are to have much further relief most of it will come from the banks finally getting competitive and competing for our mortgages."
Gareth Kiernan, chief forecaster at Infometrics, said it had become more common in recent months for borrowers to be happy to fix for a sub-5 percent rate for a year or two, rather than holding off to see whether more drops were coming.
"Whether this pushes back a bit against that... you could say the Reserve Bank is not going to raise rates any time soon, there's a chance it will need to cut in the future - you might not get much more downside on mortgage rates but it possibly doesn't hurt to wait and see."
But Eaqub said the update from the Reserve Bank included bright spots for households in other ways.
"It's not just the cost side of things... they're saying there should be more jobs from now on, on their projections we should see a bit more economic growth, inflation is not a huge problem, all those things are good for households."
He said many people refixing their mortgages were still coming off higher rates, which would provide significant relief even if rates did not fall much further from here.
The decision was made by a vote, and one member of the committee voted against the cut.
Kiernan said there was understandable concern about inflation pushing up towards the top of the Reserve Bank's target band.
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