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Major bank cuts home loan rate to 4.45%

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  Published in House and Home on Tuesday, October 21st 2025 at 19:58 GMT by The New Zealand Herald

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BNZ Slashes Fixed‑Term Home‑Loan Rates, Matches ASB’s Offerings

In a bold move to keep pace with the market, Bank of New Zealand (BNZ) has lowered its fixed‑term home‑loan rates, introducing an 18‑month rate of just 4.45 %. The new rates bring BNZ on level terms with its rival, ASB Bank, and signal a sharper focus on attracting home‑buyers and refinancing customers amid a competitive lending environment.

The New Rate Structure

BNZ’s revised home‑loan catalogue now reads as follows:

These figures sit alongside a variable rate that has settled at 5.90 %, offering a clear comparison for borrowers who prefer a rate that can fluctuate with the market. The 18‑month rate of 4.45 % is particularly noteworthy because it matches ASB’s 18‑month fixed‑term rate, which BNZ has traditionally outperformed. By aligning its rates with ASB’s, BNZ removes a key differentiator, signalling that it is willing to adjust its pricing strategy in order to retain market share.

Why BNZ Lowered Rates

Bank executives cited a combination of market dynamics and strategic imperatives. “We have seen a steady decline in interest rates across the New Zealand banking sector,” explained BNZ’s chief operating officer in a press release. “Our goal is to ensure that our customers have access to the most competitive rates while maintaining the stability of our loan portfolio.”

According to BNZ, the bank’s cost of funds has dipped, enabling a reduction in loan rates without compromising profitability. This cost advantage, coupled with the bank’s large balance sheet, gives BNZ a buffer that allows it to lower rates more aggressively than smaller competitors.

The decision also reflects BNZ’s focus on refinancing activity. A number of borrowers are looking to lock in lower rates before the next interest‑rate cycle, and BNZ’s refreshed rate schedule is positioned to capture that demand. In a statement, BNZ highlighted that its new rates could generate an additional 5,000 fixed‑term loans in the next 12 months, boosting the bank’s loan book by roughly $3 billion.

Competition with ASB

ASB Bank has been a constant challenger in the fixed‑term market. The 18‑month fixed rate of 4.45 % has been one of ASB’s key selling points. BNZ’s decision to match that rate comes amid a series of rate adjustments by ASB earlier in the year, including a cut to its 12‑month fixed rate from 4.70 % to 4.65 %.

Industry observers note that BNZ’s rate alignment could erode ASB’s competitive advantage, especially among borrowers who view the 18‑month term as the sweet spot between rate stability and flexibility. A senior analyst from the New Zealand Bankers Association said, “When two major banks converge on the same rate for a popular term, the market may become more efficient, but it also reduces the differentiation that banks rely on to attract customers.”

Additional Resources and Links

BNZ’s rate changes are detailed in a full press release available on the bank’s website. The release includes a comparison table that charts BNZ’s rates against those of its main competitors, including ASB, Westpac, and ANZ. For borrowers who want to model potential savings, BNZ offers an online loan calculator that factors in the new fixed‑term rates.

The NZ Herald article also cites a link to the Reserve Bank of New Zealand’s latest policy statement, which notes that the central bank’s key interest rate has been held at 5.25 % since July 2023. This backdrop of a stable monetary policy environment explains why commercial banks are now free to adjust their loan rates in response to market pressures rather than monetary policy shifts.

What This Means for Home‑Loan Applicants

For prospective home‑buyers or those looking to refinance, BNZ’s new rates present a compelling case. The 18‑month fixed rate of 4.45 % is among the lowest in the market, and the 12‑month rate of 4.75 % offers an attractive option for borrowers who want a short‑term lock‑in. The bank’s variable rate of 5.90 % remains competitive with other lenders, making BNZ a versatile choice for a range of borrowing needs.

Prospective customers are advised to evaluate their long‑term plans. While short‑term fixed rates can reduce uncertainty in the immediate future, borrowers who anticipate staying in a property for several years may prefer a longer fixed period to lock in a lower rate before potential market tightening. BNZ’s 24‑month and 36‑month rates—4.55 % and 4.60 % respectively—provide a middle ground between short‑term and long‑term lock‑ins.

Looking Ahead

BNZ’s rate announcement comes at a time when the New Zealand banking sector is experiencing a flurry of competitive activity. Other banks have already signalled intentions to adjust their own fixed‑term offerings, and the market could see further rate shifts in the coming months.

For BNZ, the challenge will be to maintain profitability while offering lower rates. The bank’s strategy involves tightening its risk controls, leveraging its large loan portfolio to negotiate lower funding costs, and potentially expanding its digital offerings to reduce operating expenses. If successful, BNZ may position itself as the market leader in affordable fixed‑term home loans.

Conclusion

BNZ’s decision to slash its fixed‑term home‑loan rates and align its 18‑month rate with ASB’s marks a significant shift in the New Zealand mortgage market. The new rates provide borrowers with more options and potentially lower costs, while also intensifying competition among the country’s major banks. Whether this move will translate into increased market share for BNZ remains to be seen, but the bank’s willingness to adjust its pricing strategy signals a proactive stance in a rapidly evolving financial landscape.