More banks announce mortgage rate cuts

Two more major banks have announced mortgage rate cuts. Photo / Thinkstock

Two more major banks have announced mortgage rate cuts following the Reserve Bank's decision yesterday to lower the official cash rate.

Westpac will reduce its floating rate to 6.4 per cent and its Choices Everyday rate to 6.5 per cent from Monday for new customers and from June 29 for existing clients.

However, deposit rates had also moved, with all personal online savings accounts reducing by 25 basis points, a spokeswoman said.

Meanwhile, BNZ announced a cut to its floating rate of 40 basis points in response to yesterday's OCR drop.

The interest rate on its floating home loan product, TotalMoney, will fall from 6.74 per cent to 6.34 per cent. It will also trim 25 basis points on three other mortgage products - standard variable, Rapid Repay and Mortgage One.

BNZ retail and marketing director Craig Herbison said new customers would be eligible for the new rates from tomorrow and existing customers from June 28. There were no immediate plans to cut term deposit interest rates.

"The cut to our TotalMoney rate is deliberately greater than the decrease in the official cash rate. The Reserve Bank has indicated another rate cut is on the cards and we're boldly anticipating that change with this competitive rate cut.

"A floating rate of 6.34 per cent will give customers coming off fixed term rates the chance to pause and consider if floating is now the best option for them," Mr Herbison said.

Customers should consider what to do with the extra money not going to their mortgage, for instance whether to save it or use it to pay off other debt.

BNZ has also cut its Farm First Overdraft rate by 25 basis points due to the extra pressure currently being experienced by the farming sector.

Several banks, including ANZ, ASB, Kiwibank and Co-operative Bank, immediately dropped mortgage rates yesterday morning in reaction to the OCR being cut to 3.25 per cent.

The cut caught some commentators off guard.

But Reserve Bank governor Graeme Wheeler defended the decision amid concerns it could push up Auckland house prices by allowing buyers to use lower interest rates to borrow more money, saying house price inflation was mostly limited to Auckland and the Reserve Bank had already introduced measures to target the problem.

Latest Real Estate Institute figures show Auckland's median house price surged 20 per cent in the last year to a new record median of $749,000 last month.