Banks are seeing buyers with more borrowing power, and are pricing their rates for what's ahead
BNZ has cut its fixed and variable home loan rates across the board in anticipation of an expected Reserve Bank of New Zealand (RBNZ) Official Cash Rate (OCR) reduction. The move, announced Tuesday, comes just ahead of the central bank’s Monetary Policy Statement, which will also be acting RBNZ governor Christian Hawkesby’s first major decision since taking the reins from Adrian Orr.
BNZ general manager of home lending James Leydon said that a rate cut today is “widely expected”, and so the bank felt able to move with confidence.
“Lower interest rates should also help relieve some pressure on household budgets by making borrowing more affordable,” Leydon said.
“We are starting to see the impact of lower interest rates with increasing activity in the housing market. The number of customers applying for home loans with BNZ in the six months to April 2025 has increased 20% compared to the same time last year.”
While BNZ moves ahead with pricing, Kiwibank has continued calling for bold leadership from the RBNZ. With Hawkesby seen as auditioning for the governor role full-time, the bank argues that today’s decision should be used to establish a decisive and growth-oriented stance.
“Ultimately, it’s better to act swiftly and decisively to get lower rates feeding through faster,” chief economist Jarrod Kerr said. “More meaningful cuts are required here and now. Especially with the ongoing global uncertainty.”
ASB is also forecasting a 25bp cut today, bringing the OCR to 3.25%, but notes that the tone and forward track is likely to carry more weight than the cut itself.
“It is the where-to part that will be more challenging,” ASB chief economist Nick Tuffley said.
“Pronounced uncertainty means the RBNZ will want optionality on policy moves so we’d expect cautious, data- and event-dependent commentary on the outlook for monetary policy with a published OCR track likely to trough at slightly below 3% by year end,” senior economist Mark Smith said.
On the adviser side, the OCR cuts have been reshaping both demand and operations for most of the year.
Nicky Skinner, BDM for Westpac NZ’s third-party banking channel, noted that the continuously dropping OCR has been impacting bank settings over the last year, and Westpac has seen an influx of applications for lending, restructures, & interest only requests as a result.
“There has been a lot of change in the last 12 months with the OCR dropping, and that’s affected our servicing and test rates,” Skinner told NZ Adviser. “There are a lot more applications coming in now, as people feel they may have a lot more borrowing power.
“It’s hard to know exactly what’s going to happen with interest rates,” she said. “The clients want advisers to know, but ultimately they can only guide them based on their experience and what the economists say. The rates in combination with loosening regulation have made it a really busy year so far.”
In practical terms, that’s meant an escalation in everything – more deals, more paperwork, more pressure on turnaround.
“We’re still very much working in partnership with advisers and trying to get great outcomes for the customers. "We have increased our Mortgage operations team and are currently putting in automation & AI capabilities to speed up our processing times”
With BNZ moving early, Kiwibank urging decisiveness, ASB calling for optionality, and Westpac acting on increased borrowing power, all eyes are now squarely on what RBNZ will do today.
