Westpac Adjusts Home Loan Rates Amid Rising Funding Costs

WELLINGTON (Azat TV) – Westpac New Zealand has announced a significant recalibration of its home loan rates, increasing most standard and special fixed terms while notably reducing its six-month fixed special rate. The changes, set to take effect from Monday, February 2, 2026, come as the bank cites rising funding costs driven by a sustained increase in wholesale interest rates.

This move by one of New Zealand’s major banks follows a broader trend in the financial sector and signals ongoing economic adjustments impacting both borrowers and savers across the nation.

Westpac’s Rate Adjustments Effective February 2

From February 2, Westpac’s fixed six-month special rate will decrease to 4.49% per annum. In contrast, the one-year fixed special rate will remain unchanged, also at 4.49% per annum. However, most other fixed home loan rates, encompassing both standard and special offerings, are set to increase by 0.10% to 0.20%.

Specifically, the four-year fixed special rate will rise by 0.1% to 5.39% per annum, with the standard rate reaching 5.99% per annum. The most substantial increase targets the five-year fixed special and standard home loans, which will see a 0.2% hike, bringing them to 5.49% per annum and 6.09% per annum, respectively. Westpac NZ’s managing director of product, sustainability and marketing, Sarah Hearn, confirmed these adjustments, attributing them directly to the increased cost of providing longer-term fixed home lending.

Impact on Borrowers and Savers

The adjustments extend beyond home loans to impact term deposits, offering some relief for savers. Term deposit rates at Westpac are also rising across various terms, from eight months to five years, with increases ranging from 0.10% to 0.25%. For instance, eight-month and 18-month term deposit rates will increase by 0.1% to 3.5% per annum and 3.7% per annum, respectively. Longer terms, such as three, four, and five-year term deposit rates, will see a 0.2% increase, climbing to 4.1% per annum, 4.3% per annum, and 4.4% per annum. Hearn stated that Westpac is ‘absorbing some of the cost’ of the rates increases within the business while striving to offer competitive deposit rates among the country’s main banks on longer terms, as reported by 1News.

For homeowners, particularly those considering fixing their loans, the landscape is becoming more challenging. Hearn acknowledged that ‘interest rates are a hot topic among Kiwi homeowners at the moment,’ encouraging customers to seek guidance on managing their home loans.

Underlying Economic Pressures and Wholesale Rates

Westpac’s decision is a direct response to a sustained upward trend in wholesale interest rates. Sarah Hearn highlighted that two-year wholesale rates have climbed more than 0.5% per annum since late November, leading to a 0.44% per annum increase in Westpac’s two-year fixed home loan rate during the same period. This indicates a tightening financial environment where the cost of borrowing for banks themselves has risen significantly, pushing them to pass on some of these costs to consumers.

The broader economic context supports this tightening. Infometrics chief forecaster Gareth Kiernan recently told Newstalk ZB that New Zealand’s economic recovery is ‘going sideways instead of forward.’ With annual inflation hitting 3.1% in the latest quarter, Kiernan expressed a ‘feeling of deja vu,’ noting persistent cost of living pressures and the risk of interest rates rising sooner than previously anticipated. This sentiment underscores the challenging environment in which banks like Westpac are operating, necessitating such rate adjustments.

Broader Market Context for Home Loan Rates

Westpac is not alone in adjusting its rates. Earlier in January, ANZ also raised some of its home loan interest rates, further signaling a market-wide trend. Forecasters had already warned borrowers to consider fixing their home loans soon, anticipating these upward movements. The collective actions of major banks reflect a cautious approach to lending amidst an inflationary environment and rising capital costs. The NZ Herald also detailed Westpac’s specific rate adjustments, confirming the comprehensive nature of the bank’s response to market conditions.

The ongoing adjustments by Westpac, mirroring moves by other major banks, highlight a persistent period of economic uncertainty for New Zealand homeowners. While the cut to the six-month fixed rate offers a narrow window of short-term relief, the broader trend of increasing longer-term rates and term deposits suggests a sustained effort by financial institutions to balance rising funding costs with the need to attract deposits, ultimately signaling a continued environment of higher borrowing expenses for the foreseeable future.