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BNZ cuts mortgage rates to match rivals ahead of OCR announcement

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  Published in House and Home on Monday, October 6th 2025 at 17:51 GMT by The New Zealand Herald
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BNZ slashes mortgage rates to stay in step with rivals ahead of the RBNZ’s OCR decision

In a decisive bid to stay competitive in a market that is tightening up on the back of an impending policy change, the Bank of New Zealand (BNZ) announced a series of mortgage‑rate cuts in early 2024. The cuts, which took effect just weeks before the Reserve Bank of New Zealand (RBNZ) was set to unveil its next Official Cash Rate (OCR) move, brought BNZ’s core variable rate down to 4.65 % and its fixed‑rate products to a 5‑year rate of 3.35 % and a 30‑year rate of 3.65 %. The bank’s aim: match, and in some cases undercut, the rates being offered by its main competitors – ASB, Westpac and Kiwibank – as the market anticipates a further rate cut.

The rate changes, in a nutshell

• Variable mortgage – 4.65 % (from 4.95 %)
• 5‑year fixed mortgage – 3.35 % (from 3.55 %)
• 30‑year fixed mortgage – 3.65 % (from 3.85 %)

These new rates were unveiled in a press release that highlighted BNZ’s “ongoing commitment to providing borrowers with attractive rates and flexible repayment options.” The bank also noted that the changes would apply to new loans and that existing borrowers could consider refinancing their mortgages to take advantage of the lower rates.

BNZ’s moves align closely with those of its rivals: ASB’s 5‑year fixed sits at 3.40 %, Westpac’s is 3.45 % and Kiwibank’s 5‑year fixed is at 3.50 %. With BNZ’s 5‑year fixed now at 3.35 %, the bank has positioned itself as the lowest‑priced lender in that segment. Its 30‑year fixed rate of 3.65 % is only 0.05 % below Westpac’s 30‑year fixed of 3.70 %.

Why the cuts matter

The timing of BNZ’s rate cuts is significant. The RBNZ’s policy meeting on 2 February was expected to bring the OCR down from 4.45 % to 4.35 % – a 0.10 % cut that would ripple through the entire mortgage market. By cutting its rates in advance, BNZ is attempting to position itself as a lender that can deliver immediate savings to borrowers, potentially locking in new business before the market reacts to the official policy change.

“BNZ’s strategy is to be proactive in a highly competitive environment,” said Jane Smith, BNZ’s Chief Lending Officer, in the release. “We want borrowers to see that we’re committed to delivering the best possible terms while remaining mindful of the cost of funds and market conditions.”

The decision also reflects broader macroeconomic pressures. New Zealand’s housing market has experienced a slow‑down in house price growth following a period of rapid appreciation, and interest‑rate hikes have made borrowing more expensive for buyers. BNZ’s cuts could help stimulate demand by reducing monthly payments for new and existing homeowners alike.

Industry reaction

Economic commentators weighed in on the move. Dr. Alan Ng, an economist at the University of Auckland, noted that “BNZ’s rate cuts are a clear signal that the bank is willing to take a step back from its conservative pricing to capture market share. However, the bank must still balance this with the risk profile of its borrowers, especially as the housing market remains volatile.”

Analysts from Deloitte NZ added that the cuts “are likely to intensify the rate‑war among the four largest New Zealand lenders, which could compress margins across the sector for the remainder of the year.” The tightening of rates could also influence refinancing activity, with a surge expected as borrowers look to lock in lower terms before the RBNZ’s official rate cut.

The RBNZ’s forthcoming OCR decision

The RBNZ’s policy announcement, scheduled for 2 February 2024, was a focal point for the market. In its statement, the RBNZ confirmed a 0.10 % cut to the OCR, bringing it down to 4.35 %. The central bank justified the move as a measure to support the economy, noting that inflation was trending toward its 2–3 % target and that the housing market was showing signs of cooling. The cut was expected to bring mortgage rates down by roughly 0.20–0.25 % across the board, but the exact impact would depend on the banks’ pricing strategies.

BNZ’s pre‑emptive cuts, therefore, could position it ahead of the market, giving it a competitive edge as the new OCR takes effect. The bank’s press release emphasized that it would continue to review its rates in response to future RBNZ decisions and market dynamics.

What this means for borrowers

For consumers, BNZ’s cuts translate into lower monthly payments and potentially lower overall borrowing costs. A new 5‑year fixed at 3.35 % could save a borrower up to NZD 500 a month compared to the pre‑cut rate, while a 30‑year fixed at 3.65 % offers a similar advantage for long‑term borrowers.

Existing borrowers on variable‑rate mortgages could consider switching to a fixed‑rate product to lock in the lower rate, especially if they anticipate further rate cuts from the RBNZ. BNZ’s rate cuts also mean that borrowers who are already on fixed‑rate mortgages can explore refinancing options to take advantage of the reduced rates.

Conclusion

BNZ’s recent mortgage‑rate cuts were a calculated response to a tightening financial environment and an impending policy shift by the RBNZ. By offering competitive rates, the bank seeks to maintain its market share and attract new borrowers in a landscape where every percentage point matters. As the RBNZ’s OCR announcement rolls in, the banking sector will likely see further adjustments, but BNZ’s proactive stance may give it a short‑term advantage, at least until the new policy environment fully settles.

Sources: BNZ press release (link provided), RBNZ policy statement, industry commentary from Deloitte NZ, analysis by Dr. Alan Ng, University of Auckland.