All of the major banks say they will pass on the full official cash rate cut to customers after the Reserve Bank made a surprise rate cut announcement this morning but it will only help those on floating rates.

The Reserve Bank slashed the Official Cash Rate to a record low 0.25 per cent as the coronavirus pandemic spreads.

The Reserve Bank cut the OCR by 0.75 per cent in a just-released announcement and says the new low rate would be in place for the next 12 months.

"The negative economic implications of the COVID-19 virus continue to rise warranting further monetary stimulus," the Reserve Bank said in a statement.

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"Since the outbreak of the virus, global trade, travel, and business and consumer spending have been curtailed significantly. Increasingly, governments internationally have imposed a variety of restraints on people movement within and across national borders in order to mitigate the virus transmission."

The Reserve Bank has also decided to delay the implementation of new capital rules which would have required the banks to hold more capital on their balance sheets.

Duncan Bridgeman talks to Tamsyn Parker about the reserve bank slashing interest rates.

"The negative impact on the New Zealand economy is, and will continue to be, significant. Demand for New Zealand's goods and services will be constrained, as will domestic production. Spending and investment will be subdued for an extended period while the responses to the COVID-19 virus evolve."

Westpac, ANZ, BNZ, ASB and Kiwibank have all announced cuts to their floating rates but not to their fixed term rates.

Most mortgage holders are sitting on fixed term rates at the moment.

Westpac said it would cut its floating and choices offset home loan interest rate by 75 basis points to 4.59 per cent and its choices everyday rate by 75 basis points to 4.69 per cent.

The variable rate changes come into effect from Wednesday March 18 for new customers and April 1 for existing customers.

Westpac will also cut its deposit rates with its 32 day notice saver account rate cut 75 basis points to 1.25 per cent and its bonus saver and bonus saver PIE rates reduced 75 basis points to 0.65 per cent effective from Wednesday.

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The bank said its fixed home rates and term investment rates remained under review.

The Bank of New Zealand said it would also pass on the full rate cut but did not give details on which rates it will cut.

ANZ New Zealand said it would cut its rates for floating and flexi home loan customers.

Its floating home loan rate will drop from 5.19 per cent to 4.44 per cent while the flexi rate will drop from 5.30 per cent to 4.55 per cent.

An ANZ statement said the new rates would take effect from March 19 for new floating rate home loans and April 2 for existing floating rate and flexi home loans.

Ben Kelleher, managing director retail and business banking for ANZ said the decision by the RBNZ to reduce the cash rate to historically low levels highlights the significant impact the outbreak of COVID-19 is already having on the global economy.

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"While there were a range of factors considered in making this decision, ANZ NZ is playing its role in supporting both our customers and the broader economy through this period of uncertainty," Kelleher said.

"While the OCR is only one factor in determining interest rates, we recognise the latest cut is in response to extraordinary economic conditions due in part to the impacts of coronavirus.

Kelleher said the current extreme low interest rate environment provides an opportunity for home loan customers to save and repay home loan debt.

But the bank remained concerned about the impact lower interest rates will have on savers, whose deposits provide much of the funding for its lending.

"We are cautiously reviewing deposit rates to balance the needs of savers and borrowers."

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BNZ chief customer officer, Paul Carter said in addition to passing on the rate cut it had expanded its package of support measures to help business customers through the impacts of COVID-19.

Its package includes a reduction in overdraft rates, 100 per cent asset finance funding at reduced rates, extensions of trade credit, principal repayment holidays and moving to interest only terms on a case by case basis as well as online, 24/7 capability to apply for unsecured lending up to $100K.

"This is a difficult time for many of our customers and we're doing everything we can to support them.

"Lower rates on overdrafts will help reduce costs, improve cashflow and give business owners a platform from which to work from," Carter said.

As well as deferred repayments, short term loans and extensions to lending, BNZ has immediately reduced its business overdraft facility by 1 per cent to 9.20 per cent and is offering 100 per cent funding on asset finance at the reduced rate of 7.75 per cent.

Carter said every business was unique and was facing into the economic impacts of COVID-19 in different ways.

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"Previous experience in times of economic downturn has shown us customers don't always seek help from their bank early. We're urging all our business customers to get in touch with us even if they don't think they need help."

Craig Sims, ASB executive general manager, retail, said it had made a deliberate choice to pass on the full Official Cash Rate cut to its customers so it could support them during this period of uncertainty.

"We want our customers to know ASB is here for them, and will be doing our best to help their financial wellbeing over this time," Sims said.

The bank will cut its variable home loan rate by 75 basis points to 4.45 per cent and its orbit home loan rate by 75 basis points to 4.55 per cent with the changes effective Wednesday for new customers and from March 25 for existing customers.

"We have been supporting Kiwis for more than 170 years, during many testing circumstances, and we will continue to do the right thing for our people, our customers and our communities," Sims said.

Kiwibank will reduce its floating home loan rate and offset rate from 5.15 per cent to 4.4 per cent while its revolving rate will drop from 5.2 per cent to 4.45 per cent.

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Kiwibank chief executive Steve Jurkovich said it was committed to supporting its customers and the wider New Zealand economy as the coronavirus situation evolved.

"Like the government and businesses across New Zealand, we're doing what we can to try to respond to the evolving situation."

Jurkovich said the disruption to travel and trade caused by coronavirus had affected a range of New Zealand businesses and its was bolstering its resources to support customers affected by the outbreak.

It is offering a range of options for both business and personal customers including temporary overdraft facilities, an interest only option and three month repayment holiday.

Jurkovich said anyone concerned about their situation should get in touch with the bank to discuss their needs.

News that the cash rate will sit at its new level for a year is a new move for the Reserve Bank, which has been preparing for what it would do if wholesale interest rates eventually need to become negative.

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The decision to cut the OCR so far so quickly was unanimous, the bank said.

Bruce Patten, a mortgage broker with Loan Market, welcomed the move by the Reserve Bank governor.

"He has recognised there is a requirement to do something now."

But Patten doubted the full rate cuts would be passed on to fixed rate mortgages which are already at very low levels.

He said last week when most of the bank economists were predicting a 0.25 per cent cut there were expectations that only 0.15 percentage points would be passed on to borrowers.

"I doubt banks will pass on the full rate cut. I would like to see the government put pressure on the banks to do so."

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He said home loan rates were already very low but the decision to keep the official cash rate at 0.25 basis points for the next 12 months was the biggest change today.

"It is that certainty that rates will be on hold for the next 12 months that will make the difference."

"I was expecting a 0.75 basis point cut but I didn't expect it to be on hold for 12 months."

He said it would be good news for people with business loans and other loans with variable interest rates.

But while the cut is good news for mortgage holders it will be another blow to savers who have seen interest rates at the bank dwindle as they wait and see if banks pass through the cut to deposit rates.

Patten said the reality for savers was that they would have to use their equity or capital to live off rather than relying on the interest.

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"The thing they need to be most aware of is the need to be conservative."

He doubted people would take on higher risk investments to boost their returns.

During the global financial crisis investors were caught out with money in finance companies that collapsed. Patten said it was unlikely there would be a repeat of that.

Patten said for those on fixed term mortgages he would not recommend breaking those fixed terms to try and secure a lower rate.

"It will cost you more to get out than it will save you to get a lower rate."

He said the only people who should break were those who needed to have a lower fixed cost in their budget.

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Patten said those who had secure work like teachers, nurses and the police should use this time to pay down debt.

"Those who are employed in stable businesses, this is the time to make the most of its and pay down debt."