Westpac cut its three-year fixed mortgage rate by 16 basis points and its four- and five-year rates by 20 basis points on Friday, hours after economist Kelly Silk suggested wholesale rate movements created room for banks to lower home loan rates.
Silk, speaking to the Herald, cautioned that banks must consider funding costs beyond wholesale markets, including depositor rates, when setting mortgage rates. However, she acknowledged that falling swap rates “naturally” suggest a potential for home loan rate reductions. “If you just looked at it as an absolute, the swap rates have moved lower, and so you could naturally turn around and say there’s an ability for home loan rates to potentially fall,” she said.
The rate cuts follow a period of increased competition among banks to attract customers, with $5.8 billion in mortgage debt switched between institutions in December – a record sum, exceeding the previous high of $2.6 billion. Banks offered cash incentives to secure new customers, including those already with other lenders.
Consultant Jim Reardon believes banks’ one-year and 18-month mortgages are currently overpriced given current wholesale interest rates, indicating further potential for rate reductions. He does not anticipate mortgage rates increasing in the near future. Reardon suggests bank margins have largely returned to pre-late 2025 levels, before Reserve Bank commentary prompted a jump in wholesale interest rates and subsequent increases to fixed mortgage and term deposit rates.
In late 2025, the Reserve Bank signaled a more definitive stance that its November Official Cash Rate (OCR) cut was likely to be the last in the cycle. This announcement caused wholesale interest rates to rise, tightening financial market conditions, narrowing bank margins, and leading to increases in longer-term fixed mortgage and term deposit rates of approximately 30 basis points.
Reardon anticipates banks will welcome the recent decline in wholesale rates, noting that while they haven’t fully returned to November 2025 levels, margins remain healthy, allowing for competition based on price. Silk agrees banks are “doing okay,” citing ASB’s reported net interest margin of 2.35% for the six months to December 2025 – a six-basis-point improvement year-over-year.
Sector-wide data from the Reserve Bank indicates New Zealand banks collectively held a net interest margin of 2.30% in the September quarter, slightly lower than in previous quarters. MLB Wholesale and Change Wholesale both offer rate sheets for mortgage originators, according to their websites, but specific rates require broker portal login for access. LoanStream Mortgage also publishes wholesale ratesheets, and GMFS Partners released a rate sheet on February 13, 2026.
