Westpac warns of waning rates

Westpac is picking short-term deposit rates to come off a little in the next two or three weeks as the cost of credit eases amid lower lending rates. The prediction bucks the trend among the major banks in New Zealand, which largely agree that rates will hang around their current levels for the time being.

Westpac sees deposit rates falling around 25 basis points in the next couple of weeks, according to general manager of product David Cunningham, as the cost of borrowing from wholesale funds has started to decline to more reasonable levels and recent cuts to mortgage rates by some of the banks puts some pressure on profit margins.

A fall would be "driven by tighter credit margins and cuts in wholesale interest rates for lenders," Cunningham said. "This is unquestionably the most competition in deposits that I've ever seen before - there' s been nothing like this since the mortgage price war five years ago."

Still, longer term deposit rates are likely to rise as longer fixed-term mortgage rates go up, he said.