SKN | ANZ Lifts Floating Mortgage Rates as Cashback Competition Reshapes Borrower Economics

Key Takeaways

• ANZ’s 0.1% increase in floating and flexi mortgage rates appears margin-driven rather than cost-driven.

• Aggressive cashback incentives for new borrowers are increasingly being funded by existing customers.

• The move highlights structural pricing power in New Zealand’s concentrated banking market.

Shares and sentiment around ANZ Bank New Zealand drew scrutiny this week after the lender raised its floating and flexi home-loan rates by 0.1%, despite no corresponding rise in the official cash rate (OCR) or wholesale funding costs.

The floating rate increases from 5.69% to 5.79%, while the flexi rate moves from 5.8% to 5.9%, with changes phased in for existing customers later in January. On an estimated NZ$12 billion floating-rate mortgage book, the adjustment is calculated to add roughly NZ$12 million a year in additional interest income.

ANZ said the change was a modest adjustment to “align with market conditions.” Critics argue the alignment is less about funding pressure and more about protecting margins.

Cashback Incentives Under the Spotlight

Industry observers have linked the repricing directly to ANZ’s recent 1.5% cashback campaign for new mortgage customers, one of the most aggressive offers seen in the market. The promotion triggered a surge in refinancing activity as borrowers chased large upfront incentives, in some cases exceeding NZ$30,000 per loan.

As rival banks matched the cashback offers, competition shifted away from headline interest rates toward incentives. The result, critics argue, is a redistribution of costs: generous acquisition deals funded indirectly by higher rates charged to existing borrowers.

This dynamic underscores a broader reality of New Zealand’s banking structure, where a small group of dominant lenders can move pricing in parallel without triggering sustained price wars.

Margin Expansion in a Falling-Rate Cycle

Since mid-2024, the Reserve Bank has reduced the OCR sharply as inflation returned to target, driving material declines in both fixed and floating mortgage rates across the sector. ANZ itself cut floating rates by 40 basis points in late 2025 following earlier OCR moves.

Against that backdrop, the latest 0.1% hike stands out. With funding costs unchanged, the move reinforces the view that banks retain the ability to widen margins even during easing cycles, particularly on floating-rate products where customer inertia is higher.

Implications for Borrowers

For borrowers, the episode highlights the importance of active management rather than passive loyalty. In an environment where headline rates and incentives can diverge meaningfully, negotiating, refinancing, or timing switches to coincide with promotional offers may materially affect long-term borrowing costs.

The broader takeaway is structural: in concentrated banking systems, pricing power often reasserts itself once promotional cycles fade.

Forward-Looking Perspective

ANZ’s rate adjustment is less about short-term funding pressures and more about how banks balance growth, margins, and customer acquisition in a competitive but concentrated market. As cashback-driven competition continues, borrowers should expect ongoing tension between attractive entry offers and quieter repricing elsewhere in loan books.

For long-term allocators and observers, the episode serves as a reminder that headline rate cuts do not always translate evenly across all borrowers especially in oligopolistic banking systems.

For a discreet discussion on how retail banking pricing dynamics and mortgage exposure can affect broader Australasian financial allocations, our senior advisory team is available to provide tailored insight.

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