Mortgage relief: How banks responded to OCR cut

Kiwibank said it was decreasing its home loan and business variable lending rates by 25 basis points (bps).

“In the current high interest rate environment, we understand that any decrease in lending rates can lead to meaningful savings on loans and mortgages, enhancing affordability and financial flexibility for our customers,” Kiwibank chief customer officer – business, Elliot Smith said.

ASB reduced all of its fixed home lending rates from between 10-34bps.

ASB’s one- and two-year home loan rates fell 26bps to 6.59% and 5.99% respectively.

Its six-month rate decreased 10bps to 6.89% and the 18-month term was lowered 34bps to 6.15%.

ASB also lowered its variable home loan rate by 25bps from 8.64% to 8.39%, while the Orbit rate dropped from 8.74% to 8.49%.

Jax Mitchell, ASB’s general manager wealth, insurance and partnerships, said today’s OCR decision and ASB’s rate adjustments would be welcome relief for many New Zealanders.

“The decreases to our floating mortgage rates, as well as our business banking rates, will help alleviate some of the pressure being felt by some of our homeowners, as well as our rural and business customers,” Mitchell said.

“The recent falls to wholesale rates also mean we’re able to reduce our fixed home lending terms. This is the 12th time since November we’ve lowered our fixed mortgage rates, which more than 90% of our customers hold, and will be good news for those customers refixing soon as well as prospective homebuyers.”

ANZ’s floating and flexible home loan rates will drop 10bps to 8.39% and 8.50% respectively.

Grant Knuckey, ANZ NZ managing director for personal, said the market had priced in a lot of easing over the next year.

“The New Zealand economy is still doing it tough and global markets remain volatile. But for the average borrower we do expect conditions to improve from here.”

Knuckey said when reviewing interest rates, the bank considered a range of factors, including the OCR and changes in wholesale interest rates and the need to balance the needs of borrowers and savers.

ANZ was also decreasing its Serious Saver rate by 10bps and its call savings accounts by 25bps.

CoreLogic NZ chief property economist Kelvin Davidson said the rate cut wasn’t an “earth-shattering surprise” and may not impact housing too much.

“Most people had already been anticipating an easing in monetary policy at some stage soon, and this has now just been confirmed. Indeed, banks have already been lowering mortgage rates for some fixed terms, and this process looks set to continue – which will be a huge relief for many households.”

But he said on the flipside job security had dropped.

“… the generally softer labour market environment is still likely to be a restraining influence on house sales and prices.”

Real estate firm LJ Hooker said it expected today’s RBNZ decision will see more properties come onto the market.

“As the RBNZ continues to cut interest rates, more buyers will emerge in the market. While we know the economy is slow, the RBNZ has a tough decision to make as they balance the desire to leverage monetary policy to rope in inflation, in the process of making things tougher for New Zealand families. Getting inflation inline is coming at a cost and everyone is looking for financial relief to help make ends meet,” Head of Network NZ Campbell Dunoon said.

“To their credit, banks have noticed the challenges their clients face and have started to alleviate pressure with reductions to fixed term rates. This shows banks are confident inflation is within that target rate of 1-3%. However, signs are pointing to further cuts soon. If you are taking out a new mortgage soon, or looking to refinance, talk to your mortgage broker or financial advisor before committing to a long-term mortgage rate for the lower interest rate today.”

The Reserve Bank said this afternoon that annual consumer price inflation was returning to within the Monetary Policy Committee’s 1 to 3% target band.

The committee said while official economic statistics had evolved in line with expectations in the May Monetary Policy Statement, a broad range of indicators pointed to a “material weakening in domestic economic activity” in recent months.

The Reserve Bank’s new forecast rate track suggests the OCR will fall from here to at least 5% by the end of the year and to at least 4.5% by June next year.