The Reserve Bank has indicated it still believes the job has been done and a cash rate of 5.50 per cent is enough, which they retained at the most recent review on August 16. They did, however, acknowledge that there is a chance of one further increase being required.

At present the market is pricing in about a 40 per cent increase of this happening in the first half of 2024 if inflation does prove more stubborn to contain than expected.

And expectations are starting to differ among banks. Westpac and ANZ economists are leaning towards thinking an increase may be required, although Kiwibank chief economist Jarrod Kerr is adamant that enough has been done.

Recent analysis from the Reserve Bank showed that the average New Zealand mortgage sits at a rate of about 5.3 per cent, with this expected to rise to circa 6.2 per cent by the middle of next year.

This does signal a lot of additional pain still to hit the market as this will pull further discretionary money from households’ budgets, which will unfortunately mean increased business failures in industries such as retail and hospitality.

Competitive Market

ASB has had their mortgage rates significantly above the rest of the market until recently. The CEO of the Commonwealth Bank of Australia, Matt Comyn, who is ASB’s parent, has been commenting on how competitive the market is with ASB making less than half the interest rate margin that CBA makes on home loans in Australia.

ASB was the first to pull back on the cash contributions and has deliberately decided to grow their home loan book at a lower rate than other banks.

It is unlikely the New Zealand public will have much sympathy given ongoing media commentary here about bank profits.

Cash Contributions

In the last few days ANZ has pushed up rates like that of ASB and at the same time increased some of the deposit rates they have on offer. ANZ is being more competitive than ASB over cash contributions they will offer to attract new business.

With mortgage volumes still being low across the banking market, borrowers should use this opportunity to review their lending to ascertain if better rate options exist than their current lender is offering.