Official Cash Rate: ASB makes mortgage rate cut after Kiwibank cuts lending rate ahead of Reserve Bank decision

ASB today announced cuts to its fixed mortgage and term deposit rates.

The bank made the cuts ahead of the Reserve Bank’s Official Cash Rate announcement, which is expected at 2pm today.

ASB said some short and mid-term rates would fall immediately by up to 16 basis points - but it also reduced its term deposit rates by between 5 and 20 basis points each.

“We’re optimistic this relief will be extended to more Kiwi with the OCR decision this afternoon,” ASB’s executive general manager for personal banking Adam Boyd said.

All rate decreases were effective immediately for new and current customers.

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Yesterday, Kiwibank cut its variable lending rates by 50 basis points (bps) on the eve of the Reserve Bank’s next Official Cash Rate (OCR) decision.

The consensus among economists – including those at Kiwibank – is the Reserve Bank (RBNZ) will cut interest rates by 50bps to 4.75% tomorrow.

Elliot Smith, Kiwibank’s chief customer officer business banking, said it was responding early to that call.

“While controlling inflation is essential, prolonged high interest rates have heavily burdened businesses and households,” Smith said.

“Lowering rates quickly is crucial to provide much-needed relief for borrowers, so it is important Kiwibank, and the market, responds.”

Kiwibank said reducing its variable loan rates by 50bps will benefit 35,000 home loan and business banking customers.

Both Kiwibank’s variable and offset variable term loans will fall from 8.25% to 7.75%.

Its revolving loan drops from 8.3% to 7.8%.

Competition for mortgage lending has become competitive over the past two months as the major banks repeatedly cut fixed home loan rates.

This has seen mortgage rates drop to below 6% across a number of lending terms.

According to Interest.co.nz, ASB and BNZ have the lowest standard fixed two-year rates among the big five banks at 5.79%.

ANZ is offering a “special” two-year fixed home loan rate of 5.69%.

“The wholesale rates market (measured by overnight index swaps) has 44bps priced into the October decision – roughly 90% chance of a 50bps cut to 4.75%,” Kiwibank economists wrote last week.

“The November decision has another 48bps priced to 4.33%, so that’s most of a 100bps move to 4.25%.”

February was just as interesting with another 45bps priced in already.

“So traders are pricing in ‘odds-on’ bets of 50bps cuts. The cash rate is priced to hit 3% by August next year, with a terminal rate around 2.5%, in line with our forecast.”

The RBNZ cut interest rates in August by 25bps to 5.25% – the first cut since March 2020.

Kiwibank, ASB and ANZ moved swiftly in lowering mortgage lending rates following that decision.

Haggling for a better rate

OneRoof today reported that ANZ had slashed its one-year mortgage rate on the quiet.

ANZ’s one-year discretionary non-advertised mortgage rate was cut to 5.59% for existing and new customers who have at least 20% equity.

However, ANZ’s website advertises fixed one-year mortgages at 6.19% (special) and 6.79% (standard).

Consumer NZ says it pays to haggle to get the best interest rate deal when your mortgage comes up for renewal.

The Commerce Commission’s final report on personal banking, released in August, found discretionary discounting was a common feature of competition for home loans in New Zealand.

“While all banks advertise headline interest rates, the actual home loan interest rates that an individual consumer may be offered can vary significantly from these headline rates,” the report noted.