Banks issue challenge on mortgage rates

Two of the smaller players in the banking market have sent out a challenge to the big boys.

CBS Canterbury and PSIS have today cut their floating mortgage rates by a full 50 basis points, challenging the big four Australian owned banks and Kiwibank to follow suit in the wake of the Reserve Bank's 50 basis cut in the Official Cash Rate five days ago.

CBS Canterbury cut its floating rate to 6.45 per cent, which brings it into line with the major banks, but PSIS went further than the major banks by cutting its regular floating rate to 5.75 per cent, giving it the lowest variable rate on the market under Kiwibank on 5.99 per cent.

Disquiet is growing among homeowners about the apparent reluctance of the major banks to pass on the lower OCR in the form of lower floating mortgage rates.

The banks have argued their funding costs on international borrowings and local term deposits have remained high despite the OCR cut to 2.5 per cent.

CBS Canterbury, a building society based in Christchurch, also cut its 6 month and 12 month mortgage rates, but by slightly less than the full 50 basis points.

However, it actually raised its 12 month and 18 month term deposit rates as competition remains intense among the banks for New Zealand savings.

CBS Canterbury cut its six month mortgage rate by 26 bps to 5.99 per cent and its one-year rate by 46 bps to 5.79 per cent. In a move that will steepen its rate curve, CBS increased its five year mortgage rate by 10 bps to 7.60 per cent.

CBS also announced it was increasing its 12 and 18 month term deposit rates by 25 basis points to 4.50 per cent. Alongside this, it said it was cutting its 2 year term deposit rate by 50 bps to 4.50 per cent and its 3 year term deposit rate by 75 bps to 4.50 per cent.

The new CBS rates are effective from today, it said.

PSIS announced it would cut its standard variable mortgage rate by 50 basis points to 5.75 per cent, currently the lowest floating rate offered in New Zealand. New PSIS rates are effective from tomorrow.

Other mortgage rate changes by PSIS included a cut in its 6 month rate by 40 bps to 5.40 per cent, a cut in its one year rate 25 bps to 5.50 per cent and a cut in its 2 year rate by 25 basis points to 5.95 per cent. PSIS also cut its 'special' variable rate by 50 basis points to 5.25 per cent. Only long term customers with more than 20 per cent equity in their houses can get this rate.

* All the latest mortgage rates from all banks, building societies, credit unions and finance companies are available here.

- INTEREST.CO.NZ