The Reserve Bank says the slowing economy has led to it cutting the official cash rate to 2.5 percent from 2.75 percent.
Some lenders have already reduced their rates, but a major bank says many homeowners are missing the chance to pay off mortgages quicker while rates are low.
Banks were quick to respond to news of the fourth cut in the official cash rate in a year, offering yet lower mortgage rates to consumers.
But that means lower returns on savings too.
The Reserve Bank says growth in the New Zealand economy has softened this year, and on the international market it's sluggish too.
"Globally, economic growth is below average and inflation is low, despite highly stimulatory monetary conditions," says Graeme Wheeler, Reserve Bank Governor.
House price inflation in Auckland is still high but there are signs it's easing, as recent tax and LVR changes come into play.
But immigration is also driving the Auckland housing market.
"[Immigration is] running at 55,000 at this point, so that's a 1.5 percent increase in the working age population," Mr Wheeler says.
The Reserve Bank is tasked with controlling inflation and has a target rate of between one and three percent, but it's currently below that.
"There's risks that if you have low inflation that you get adverse shocks that could put you into deflation," Mr Wheeler says.
Mr Wheeler says there's also an issue of fairness involved.
"The fact that interest rates are very low does affect the returns to savers – for example, those that are reliant on retirement incomes."
The Reserve Bank's not likely to cut rates further, with stronger economic growth expected in the coming year.
BNZ's head of retail says despite mortgage rates being some of the lowest in a generation, home owners aren't taking advantage and paying off their mortgages faster. He warns if the current rate environment isn't motivation enough, he doesn't know what is.