Retail banks have begun to cut their mortgage interest rates after the Reserve Bank dropped the Official Cash Rate from 3.5 to 3.25%.

The Bank of New Zealand (BNZ) cut its fixed and floating mortgage rates yesterday, ahead of the Reserve Bank’s decision.

And today, ANZ followed, announcing it would drop its floating home loan rate to 6.49% and its flexible home loan rate to 6.60%.

Westpac then announced a special rate of 4.95% for home loan rates across one-, two- and three-year terms. The bank cut its variable home lending rates by 0.15%.

ANZ said it would also lower its business floating rate from 5.05 to 4.80%. Rates for its serious saver account were to drop from 2.55% to 2.3%, and its online call and business premium call account rates will drop by 10 basis points.

ANZ said the home loan rate changes will take two business days to take effect for new customers and four business days for existing ones.

Grant Knuckley, ANZ’s managing director for personal banking, 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.

“For those who are considering locking in a fixed rate, this is also something most customers can do themselves in GoMoney.

“Customers should be mindful that fixed rates have fallen considerably and generally reflect interest rate changes expected in this cycle.”

Westpac’s general manager of product, sustainability and marketing, Sarah Hearn, said: “Today’s OCR [Official Cash Rate] cut should give consumers confidence that cost pressures are continuing to ease after several years of elevated inflation and interest rates.”

BNZ cut its fixed-term rate to 4.89%, effective since yesterday. The bank’s six-month fixed home loan rate was cut to 5.35%. Its one-year rate will drop from 4.99 to 4.95%.

BNZ’s standard variable rate was cut from 6.69 to 6.44%.

James Leydon, BNZ general manager for home lending, said the bank was confident to pass on savings to home owners, saying there was wide expectation the Reserve Bank would cut the OCR today.

“We know many of our customers are looking beyond the very short-term fixed rates as the interest rate environment evolves,” Leydon said.

“By cutting our fixed rates across all terms, we’re giving customers more choice and the ability to lock in a competitive rate for a longer period.

“Lower interest rates should also help relieve some pressure on household budgets by making borrowing more affordable.”

Leydon said they were 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.”

BNZ said it was also opening all its branches five days a week to accommodate customer needs.

Raphael Franks is an Auckland-based reporter who covers business, breaking news and local stories from Tāmaki Makaurau. He joined the Herald as a Te Rito cadet in 2022.