Kiwibank takes its carded one year home loan rate below 7%, the first time any main bank has offered a rate that low for that term in 10 months, cuts key term deposit rates at the same time

Following Westpac's Friday announcement it's cutting some carded fixed home loan rates Monday, following earlier reductions by both ANZ and ASB, Kiwibank is now entering the fray with an outsized one year rate cut.

Arguably the Kiwibank -26 basis points (bps) reduction to 6.99% is the most important of them all, so far.

The other three essentially shifted down -10 bps in unison to about 7.15%. Kiwibank has pushed the boat out much further.

In fact, the last time we had a main bank offering a one year carded fixed rate below 7% was in mid July 2023, with Kiwibank's 6.89% and Westpac's 6.99% rates back then.

BNZ, which has been running with competitive carded fixed rates for some time, suddenly finds itself marooned with a highish 7.24% one year rate, although that is the same level as the new Westpac rate. Almost certainly they will both probably fall back into line very soon. Westpac is hoping its sharp 6.39% three year rate will be seen as a distinctive and attractive alternative.

But the one year rate levels really matter, because that is the new favoured term by borrowers.

Two additional points are worth making. First carded rates are less relevant these days. Bank apps offer good discounts to existing borrowers who are ready to roll over their interest rate contract. A few simple clicks and you are done, probably with a lower-than-carded rate. That 'simplicity' discourages competition, especially when you feel you got a 'good deal' from a 'lower rate'. Please note the current discount offers from these apps in the comment section below if you know them.

And secondly, the shift short is raising the power and influence of the RBNZ's monetary policy to affect household budgets. The rush short means far more loans will be affected by RBNZ rate revisions when they come. Today markets are pricing in about two -25 bps OCR cuts in 2024. The OCR does have influence on wholesale pricing out to about 12 months, much less for longer terms. (Perhaps some of the recent retail rate falls can be attributed to the shifts already at the wholesale level.)

For savers Kiwibank has trimmed its key term deposit rates at the same time, 'paying' for the home loan rate reductions. They cut -10 bps from each of their 6, 9 and 12 month term deposit rates

One useful way to make sense of the changed home loan rates is to use our full-function mortgage calculator which is below. Term deposit rates can be assessed using this calculator.

And if you already have a fixed term mortgage that is not up for renewal at this time, our break fee calculator may help you assess your options. Break fees will be minimal in a rising market. But they become important in a falling market however.

Here is the updated snapshot of the lowest advertised fixed-term mortgage rates on offer from the key retail banks at the moment.

Fixed, below 80% LVR	6 mths	1 yr	18 mth	2 yrs	3 yrs	4 yrs	5 yrs
as at May 13, 2024	%	%	%	%	%	%	%
ANZ	7.25	7.14	6.89	6.79	6.65	7.34	7.34
	7.24	7.14	6.89	6.75	6.65	6.49	6.39
	7.29	7.24	6.89	6.79	6.65	6.55	6.55
	7.25 -0.10	6.99 -0.26		6.79	6.65	6.55	6.55
	7.29 -0.10	7.24 -0.05	6.95	6.75	6.39 -0.26	6.39 -0.20	6.39
Bank of China	7.09	6.99	6.75	6.65	6.49	6.39	6.39
China Construction Bank	7.19	7.09	6.89	6.75	6.49	6.40	6.40
Co-operative Bank	7.29	7.14	6.99	6.79	6.65	6.55	6.55
Heartland Bank		6.89	6.69	6.55	6.35
ICBC	7.19	7.05	6.79	6.75	6.59	6.49	6.49
	7.35	7.24	6.99	6.69	5.99	6.19	6.19
	7.39	6.99	7.19	6.75	6.65	6.59	6.59