The bank's decision on Friday matched those of the big four banks and its main Tasmanian-based rival, MyState Bank.

Bank of us said it would cut rates by 0.25 percentage points for variable owner-occupied and residential investment home loans and business loans.

"As the only Tasmanian customer-owned bank, we understand that Tasmanians are facing uncertainty in the current economic climate and we have taken this into consideration when making our decision," chief executive Paul Ranson said.

"We also recognise that, in this low interest rate environment, we must continue to balance both our borrowers' and depositors' expectations, and make sure that our business remains sustainable for the long term."

He said the rate reduction would provide the bank's lowest ever new lending rates under its FlexiDiscount product.

"Our FlexiDiscount home loan product will reduce to a variable interest rate of 2.93 per cent per year for a less than 80 per cent loan to value ratio and, for borrowers that qualify for lending under the federal government's First Home Loan Deposit Scheme, a variable interest rate of 2.78 per cent," he said.

The lower rates for existing borrowers will take effect from April 1, with new lending rates available from March 11.

The bank increased its seven-month term deposit rate to 1.85 per cent earlier in the week.