Westpac cuts 18-month home loan rate after Reserve Bank holds OCR at 2.75%

A major bank is cutting one of its medium-term home loan rates.

The move by Westpac to cut its special 18-month rate by 0.26% to 5.19% from Monday comes two days after the Reserve Bank shocked economists with a decision to keep the Official Cash Rate at 2.75%.

The bank’s 18-month home loan rate is the lowest among the country’s big five banks as of 1pm today, Westpac’s product, sustainability and marketing managing director Sarah Hearn said.

“While our one-year term continues to be popular, locking in for 18 months could be an option for home owners wanting certainty on their repayments for a bit longer.”

Hearn warned that “overall, our economists think interest rates are heading upwards over the next year”.

“Our data suggests most home owners are coping well with higher rates, but anyone who’s worried about making ends meet should get in touch so we can work together on a plan.”

ANZ, ASB and BNZ’s special 18-month home loan rates are all set at 5.29%, according to interest.co.nz.

Kiwibank doesn’t offer an 18-month rate.

The lowest one-year fixed term rates are ANZ and ASB’s 4.99% offers, followed by Kiwibank’s 5.15%. BNZ and Westpac are on 5.19%.

Westpac has the lowest two-year rate at 5.29%, with ANZ, ASB and BNZ at 5.35% and Kiwibank at 5.39%, according to interest.co.nz.

‘Flabbergasted’

The Reserve Bank’s surprise decision on Wednesday prompted pushback from stunned economists, who warned of inflation risks.

They were “frankly flabbergasted” by the decision to leave interest rates on hold, BNZ head of research Stephen Toplis said.

“While central banks are not obliged to follow market pricing and/or the consensus, it is rare that they move diametrically against them.”

“In doing so, the RBNZ has added to inflationary pressure instantaneously by encouraging an already soft New Zealand dollar to fall further.”