Mortgage rates have begun to fall in response to the Reserve Bank's decision to cut the Official Cash Rate.
The central bank this morning lowered the benchmark interest rate from 3.25 percent to 3 percent and signalled further cuts were likely.
Reserve Bank governor Graeme Wheeler. Photo: RNZ / Diego Opatowski
The country's biggest bank, ANZ Bank, will cut its floating rate from 6.39 percent to 6.24 percent from next Monday.
Kiwibank cut its floating rate from 6.4 percent to 6.15 percent effective immediately for new borrowers, and in two weeks' time for existing customers.
The BNZ has dropped the rate on its floating home loan product from 6.34 percent to 5.99 percent, from Monday.
The Co-operative Bank had already cut its floating rate in anticipation of the Reserve Bank decision.
The New Zealand dollar rose after the announcement, jumping more than half a cent against the US dollar to 66.47 US cents, and almost 1 cent against the Australian dollar to 90 cents, before easing back a bit.
Listen to Patrick O'Meara discuss today's moves
Economic growth slowing
In its decision this morning, the bank cited slowing economic growth and a shaky global environment.
The Reserve Bank said the economy was growing at an annual rate of about 2.5 percent, supported by low interest rates, robust construction activity and record high immigration.
But dairy prices had fallen sharply - about 20 percent in the last six weeks - while rebuilding activity in Christchurch appeared to have peaked.
Inflation remained tame at 0.3 percent, well below the Reserve Bank's 1-3 percent target band, due to previous strength in the New Zealand dollar and a large fall in oil prices.
The central bank forecast inflation would rise close to the midpoint of 2 percent by early 2016 because of the fall in the dollar, though it was unsure how quickly that would flow through into higher prices.
House prices
The lower dollar will help exporters and import competing sectors compete against their foreign rivals, but the Reserve Bank believes the currency should fall even further given the weakness in commodity prices.
It noted that that house prices continued to increase rapidly, but outside Auckland, house price rises generally remained low.
The Reserve Bank is introducing more measures to curb riskier lending, but has said that building more houses is the only real solution to fixing Auckland's housing problems.
The central bank says some further reductions in interest rates are likely.
Economists are divided about how low central bank governor Graeme Wheeler will go.
Some analysts are picking Mr Wheeler will unwind all of last year's rate hikes before the end of the year, which would take the OCR back to its record low of 2.5 percent.
But some expect he will go further, and a drop to 2 percent cannot be ruled out.