BNZ has cut a number of its home loan rates to match rival banks ahead of tomorrow’s Official Cash Rate (OCR) decision.

The bank said it was trimming its six-month fixed mortgage rate by 10 basis points (bps) to 4.89%, effective tomorrow.

Its 18-month fixed term rate would get the largest cut, dropping 26bps to 4.49%.

BNZ is also cutting its two- and three-year fixed home loan rates by 10bps to 4.65% and 4.85%, respectively.

Last week, all major banks made cuts to their lending rates.

The five major banks, including Kiwibank, dropped their one-year rates to 4.49%.

Kiwibank currently has the best six-month home loan rate at 4.85%, for those with minimum 20% equity.

Markets have priced in another OCR reduction on Wednesday as a certainty, but uncertainty remains around the size of the cut, with economists divided over a 25bps or 50bps cut.

At its last meeting in August, the Reserve Bank (RBNZ) published a new rate track for the OCR, suggesting two more rate cuts are expected by March next year, taking it to 2.5%.

However, ASB chief economist Nick Tuffley has argued the OCR needs to get down to 2.25%.

“The fire of recovery needs more accelerant. The OCR needs to go lower than recently thought… to get monetary conditions more into stimulatory territory,” Tuffley said.

Kiwibank economists said broad-based weakness in the Kiwi economy warranted “a bold move” on Wednesday.

The OCR, which sits at 3%, has fallen 250bps since August last year, when it was 5.25%.

Nathan Miglani, managing adviser at Squirrel mortgage brokers, told the Herald that interest rates would need to get below 4% to get people moving again.

“With the way things are going and what we are sensing, business confidence is still low, the GDP last quarter didn’t help… I reckon now to move people back to start spending money on hospitality, retail, I think the rates need to be sub-4%," he said.

Miglani said he would not be surprised to see a one-year mortgage rate of 3.99% in the next six months.

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