Retail banks look likely to start competing in earnest for customers through lower mortgage rates as they prepare to follow the lead set yesterday by ANZ New Zealand.
ANZ and National Bank has launched a new one-year fixed home loan rate of 5.25%, a drop of 0.4% on its present rate.
David Kneebone, the executive director of the Commission for Financial Literacy and Retirement Income, said now was a good time for people to talk to their banks about mortgages.
"It's a great time to barter. Interest rates are at a recent low and it's incredible to think they will stay this low for the medium-term. We have heard of people getting better deals from their own banks by asking. They can only say no."
It was important that if people saved money on their mortgages they used the money to reduce debt, he said.
ANZ retail managing director Kerri Thompson said domestic and international conditions meant wholesale interest rate markets had been volatile.
"There's currently a window for cheaper longer-term wholesale interest rates that ANZ is taking advantage of and we're passing this on to customers.
"We're not sure how long this window will remain open. We hope to be able to keep it open for a while, but we'll be reviewing it on a daily basis."
It was ANZ's lowest one-year rate since at least 1995.
Kiwibank has a special 4.99% interest rate, but that required customers to have a 30% deposit.
While there is good news for homeowners with mortgages, there was bad news for savers.
ANZ announced it would reduce its six-month term deposit rate by 0.3% to 4%. There would be no change to the Serious Saver account (4.5%), the nine-month term deposit (4.5%) or the 12-month term deposit of 4.6%.
Economists are starting to factor that a cut in the Reserve Bank's official cash rate will be the next move as a way of moving the economy into growth. The New Zealand dollar has been falling in recent days, putting pressure on short-term interest rates.
About a third of New Zealanders have a mortgage, but most now have a floating mortgage, a change from 10 years ago when more than 80% of mortgages were fixed.
Most people with floating mortgages are expected to stay on floating, as there is no sign of interest rates rising before the middle of next year.
ANZ New Zealand, the local unit of Australia and New Zealand Banking Group, this week reported a 13% rise in underlying profit as it fattened margins from more customers borrowing on floating interest rates, and despite a declining loan book.
Underlying profit, which strips out non-cash and significant items that distort the profit figure, climbed to $684 million in the six months ended March 31, from $605 million a year earlier.
Reported profit jumped 29% to $615 million. Net interest income grew 6% to $1.63 billion.
