Home Loan Interest Rates Drop today
February 05, 2025 at 8:39 PM
Kiwibank has become the latest bank to cut home loan interest rates, joining the trend set by other major lenders like ASB and ANZ. Kiwibank’s two-year special rate has dropped from 5.45% to 5.29%, while its three-year special has decreased from 5.69% to 5.59%. However, to qualify for these special rates, borrowers must have at least 20% equity in their home.
Its standard rates (for those with lower equity) have also come down slightly—falling from 6.35% to 6.19% for two years and from 6.49% to 6.39% for three years. These reductions indicate a broader easing of home loan costs compared to last year when two-year rates peaked at an average of 7.3%, according to Reserve Bank data.
Other banks have already started lowering their rates, with ASB cutting its one-year rate to 5.54% and its 18-month rate to 5.34%. ASB’s two-year rate is now also 5.29%, matching Kiwibank. Meanwhile, ANZ made similar cuts two weeks ago, showing a clear downward trend across the market.
What This Means for Borrowers
For homeowners and prospective buyers, these rate cuts could mean more affordable mortgage repayments. The reduction in interest rates may also encourage those waiting on the sidelines to lock in fixed-term loans at lower rates. However, with many of these special rates requiring a 20% deposit or equity, first-home buyers may still face challenges if they have a smaller deposit.
Commentary
This trend suggests that banks anticipate a stabilisation or potential drop in the Official Cash Rate (OCR) in the near future, which would further ease borrowing costs. It’s a positive signal for the housing market, potentially leading to increased activity as confidence grows among buyers.
However, borrowers should remain cautious—while rates are declining, they are still significantly higher than the record lows seen during the pandemic. Choosing the right mortgage structure is key, and borrowers should consider mixing fixed terms or consulting with financial advisers to balance affordability with flexibility.
Final Thoughts
The downward shift in mortgage rates is a welcome relief for many, but careful planning is still essential. Whether you’re refinancing, buying, or investing, it’s crucial to assess your financial position and long-term goals before making a commitment. Keep an eye on the market, as further cuts could be on the horizon if economic conditions continue to evolve.