The Reserve Bank shaved another 0.5% off the official cash rate yesterday, which was not as much as some expected but it still triggered an early response from retail banks.
Mortgage broker Mike Pero Mortgages started talking up the housing market as banks cut their interest rates.
Lower house prices, combined with interest rates at attractive levels, had significantly improved home affordability, chief executive Shaun Riley said.
Businesses and farmers will be among the beneficiaries this time after banks caught flak from Federated Farmers, in particular, for being slow to pass on earlier rate cuts.
ANZ, National Bank and BNZ cut their business and farming lending rates.
Westpac cut its floating home mortgage rate and its six-month fixed rate, but did not mention business rates.
Westpac was reviewing its other rates but suggested fixed-term rates had already built in the expectation of yesterday's cuts and further significant changes were unlikely.
ANZ-National chief executive Graham Hodges said the conditions in the wholesale money markets remained challenging, resulting in significantly increased funding costs for banks.
"We are no different. However, we also appreciate that New Zealand households, farmers and business owners are facing similar challenges as a result of the current market downturn.
"As well as reducing lending rates, we're committed to keeping capital flowing through the business and rural sector."
ANZ-National supported more than 120,000 small to medium-sized enterprises and rural businesses in New Zealand, with an overall portfolio of more than $40 billion, he said.
Last month, the bank committed more than $4 billion in new lending to farms and businesses for the year ahead.
Reserve Bank governor Alan Bollard said any future cuts in the OCR would be much smaller than observed recently.
The OCR had been reduced by 5.25% in about six months, taking interest rates to very stimulative levels.
Further falls in the lending rates faced by households and businesses were in the pipeline.
"While credit growth is easing in line with the weak economy, we expect financial institutions to continue lending on sound business propositions to support the recovery."
Dr Bollard did not expect to see in New Zealand the near-zero policy rates of some countries.
New Zealand needed to retain competitiveness in the international capital markets.
"We will assess the need for further cuts in the OCR against emerging developments in the global and domestic economies, and the responses to policy changes already in place," he said.
ANZ-National Bank chief economist Cameron Bagrie said reading between the lines, looking at the 90-day bank bill projections of a trough at 3% and based on Dr Bollard's statement, an OCR of 2.5% seemed the most likely outcome.
That was subject to the economic outlook evolving in line with the bank's projections, which was also noted as having "down side risks".
Small open nations, such as New Zealand, that were reliant on offshore capital, faced a constraint in terms of how low rates could go, he said.
For New Zealand, the likely floor resided around 2% - zero real rates, plus inflation at the mid-point of the Reserve Bank policy target band.
"Flagging 2.5% still leaves the Reserve Bank with 50 basis points up its sleeve.
"It also means watching the Reserve Bank of Australia, with maintaining competitiveness in capital markets a consideration," Mr Bagrie said.
