• BNZ has reduced its floating mortgage interest rate by 0.1 per cent
• The Co-operative Bank was the only bank to pass on the full 0.25 percentage point cut
• Credit card rates remain unchanged

The BNZ has now joined other major banks in passing on some of last week's official cash rate cut to its mortgage-holders.

The Reserve Bank on Thursday cut the official cash rate from 2.5 per cent to 2.25 per cent in a move which surprised many who had expected the bank to wait until June to make the cut.

But only The Co-Operative Bank passed on the full rate cut slicing 0.25 off its floating rates.

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While ANZ, Westpac, ASB and Kiwibank made partial rate cuts. BNZ this afternoon said it will shave .10 off its rates dropping its standard floating rate at to 5.69 per cent.

That compares to Kiwibank and The Co-operative Bank which are both offering market leading floating rates of 5.45 per cent.

A BNZ spokeswoman said the changes would come into effect tomorrow.

"Our decision to cut our floating interest rates by 10 basis points is based on a number of factors in a very competitive market. Interest rates are currently at an historic low so it's a great time for customers to consider their options."

Figures from the Reserve Bank's monetary statement show the cost of longer term wholesale funding for banks has risen since mid 2014 and the bank is concerned an increase in credit growth could see banks needing to rely more on overseas funding rather than using local deposits to fund home-loan lending.

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"To date, strong domestic deposit growth has limited the need for New Zealand banks to borrow at these higher rates.

"However, acceleration in credit growth over the past year might increase banks' reliance on higher-cost long-term wholesale funding, leading to higher New Zealand mortgage rates.

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"Moreover, continued financial market volatility may contribute to further increases in funding costs," the Reserve Bank said in its statement."

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The decision by the banks not to pass on the full rate cut has attracted criticism from Labour leader Andrew Little who has said he would consider forcing banks to pass on cuts in the official cash rate if they did not respond to a "stiff-arming".

Little said if Labour was in government it would start with a "pretty serious talking" with the banks.

"And if they are not responsive to that you've got to look at your options. I mean you're in government, you have the power to legislate. I wouldn't rule it out and if we did it, it would be with great reluctance and a heavy heart."

He said the banking sector had been very profitably through good and bad.

A spokeswoman for the New Zealand Bankers Association said it did not wish to respond to comments made by Andrew Little at this time.

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She said it was up to each bank to set its own interest rates and there were a number of elements taken into consideration when doing so.

"A decision to adjust interest rates following an OCR rate change always needs to consider the short and long-term outlook and address domestic and international environmental factors - such as continued financial market volatility and the increases banks have recently experienced with their funding costs.

"In this process, banks also evaluate lending to different market segments, such as rural, business and housing, and consider the risk profiles of each."

Interest rates can move in both directions depending on a range of factors, as described above.

She said New Zealand's banking industry remained resilient and highly competitive, which was good for New Zealand and New Zealanders.

Canstar New Zealand chief executive Jose George said it was likely banks may have had to increase rates if the official cash rate was not cut, something which was not very palatable to the public.

The Herald asked the BNZ, Westpac and ANZ if they were planning to hike rates prior to the surprise cut but none gave a straight answer to the question.

A spokesman for ANZ said it did not comment on hypothetical questions.

Westpac said the overall cost of customer loans was a key consideration for deciding how it priced home loan rates.

"Any decrease in the OCR will have a positive impact on the cost of bank funding here in New Zealand, however, like most other banks.

Westpac also has a significant portion of funding from overseas.

Around $50.7 billion of New Zealand home loans are on floating rates while $166.9 billion is fixed, according to January figures produced by the Reserve Bank of New Zealand.

Watch: Reserve Bank moves on rates:

Reserve Bank governor Graeme Wheeler has cut the official cash rate a quarter point.