HSBC drops mortgage rate to 4.95pc

Reserve Bank Governor Graeme Wheeler is due to announce whether or not the Reserve Bank will change the Official Cash Rate on Thursday. Photo: Mark Mitchell.

HSBC has dropped its one and two-year fixed home loan rates to a market leading 4.95 per cent following yesterday's cut to the official cash rate.

But there's a catch.

Borrowers have to qualify as an HSBC Premier customer, meaning they must have a minimum combined home loan of $500,000 or $100,000 in savings and investments with the bank.

They must also have a deposit of at least 20 per cent - or 30 per cent in the case of new investment lending in Auckland - and have their salary credited to an HSBC account.
HSBC's one and two-year fixed rates were previously set at 5.20 per cent and 5.30 per cent, respectively.

The bank said it was dropping its floating rate to 6.60 per cent from 6.84 per cent, while its revolving credit rate would fall to 6.75 per cent from 6.99 per cent.

BNZ also cut its floating rate today from 6.74 per cent to 6.34 per cent.

Westpac has also reduced its floating mortgage rate to 6.40 per cent and its Choices Everyday rate to 6.50 per cent.

A number of banks slashed mortgage rates yesterday in reaction to the Reserve Bank cutting the Official Cash Rate to 3.25 per cent.

ANZ, ASB, Kiwibank, and Co-operative Bank all immediately dropped their floating mortgage rates.

ANZ announced that it would lower the interest rates on its floating and flexible home loans by 0.25 per cent p.a. - to 6.49 per cent for ANZ Floating Rate Home Loans, and 6.60 per cent for Flexible Home Loans.

Fred Ohlsson, ANZ's managing director retail and business banking, said the new rates would be welcomed by home buyers, particularly first home buyers.

Kiwibank matched the cut in the OCR, reducing its floating mortgages rates - variable and revolving - from 6.65 per cent p.a. to 6.40 per cent p.a.

ASB lowered its variable home loan and Orbit home loan rates by 0.25bps from 6.75 per cent p.a to 6.50 per cent p.a.

Other lending and deposit rates are currently under review, ASB said.

ASB senior economist Chris Tennent-Brown said a further cut in the OCR can be expected at the September review, taking the OCR to 3 per cent.

The Co-operative Bank dropped its floating home loan rate by 25 basis points to 6.45 per cent p.a.

"We take our guidance on the direction of interest rates from the Reserve Bank and today they've given a strong signal that the immediate direction of interest rates is downwards," said Co-operative Bank chief executive Bruce McLachlan.

The Reserve Bank this morning cut the benchmark rate a quarter-point and signalled more may be on the way as the dairy sector's weak outlook weighed on the nation's terms of trade and threatened to delay an increase in inflation from its near-zero level.

The New Zealand dollar tumbled.

Governor Graeme Wheeler lowered the official cash rate in a closely watched decision where markets were largely split on whether he would cut rates now or later, saying a more pronounced slump in export prices than expected and the prospect of waning consumer demand on increasing petrol prices threatened to keep a lid on already low inflation.

"The weaker prospects for dairy prices and the recent rises in petrol prices will slow income and demand growth and increase the risk that the return of inflation to the mid-point would be delayed," Wheeler said in Wellington. "A reduction in the OCR is appropriate given low inflationary pressures and the expected weakening in demand, and to ensure that medium-term inflation converges towards the middle of the target range."
"We expect further easing may be appropriate."

The New Zealand dollar fell as low as 70.11 US cents, from 72.07 cents immediately before the decision was released at 9am. It was recently trading at 70.52 US cents. The trade-weighted index dropped as low as 73.10 and was recently at 73.52 from 74.99 before the statement.

"We were surprised by the RBNZ's early cut - this is the first RBNZ move that was not clearly signalled ahead of time since the 2011 post-earthquake cut, and before that, since 2005," said Dominick Stephens, chief economist at Westpac Bank.

"Markets were similarly surprised - the exchange rate fell almost two cents and two-year swap rates fell 17 basis points," he said. One consequence could be a further drop in fixed mortgage rates, which will stimulate the housing market."

Just six of 16 economists forecast today's rate cut.

Before the announcement, traders had been pricing in a 40 percent chance Wheeler would reduce the benchmark rate for the first time since the March 2011 emergency cut in response to the Canterbury earthquake.

See the Full Monetary Policy Statement here: