Banks cut home loan rates after Reserve Bank slashes OCR to 2.25%

Multiple banks have already started to drop their home loan rates following the Reserve Bank of New Zealand’s decision to slash the Official Cash Rate by 25 basis points to 2.25%.

The Co-operative Bank immediately cut its floating home loan rate 39 basis points to 4.99%, more than the Reserve Bank’s cut.

ANZ decided to lower both its floating and flexible home loan rates by 20 basis points to 5.69% and 5.8% respectively.

The bank’s Serious Saver rate has been cut by 15 basis points and Grant Knuckey, an ANZ managing director, noted the bank was conscious to the needs between borrowers and savers and ANZ economists indicated rates were near the bottom of the cycle.

Westpac has trimmed its variable home loan rates by 20 basis points, but is leaving its Notice and Simple Saver rates where they are.

“By announcing variable rate changes today, we’ll be delivering rate relief as soon as next week for borrowers,” Sarah Hearn, a managing director at Westpac, said.

ANZ is just one of the banks to cut its home loan rates after the Reserve Bank's announcement. Photo / Alex Burton

“We also know that savings customers are watching falling rates closely and we’re here to support them.

“Importantly, we’ve held our Notice Saver rate unchanged since June of this year – while the OCR [Official Cash Rate] has fallen by 1.00% p.a. in that time."

ASB is to reduce its home loan rates as well. Adam Boyd, an executive general manager at the bank, said this should be welcome news to customers.

“We have carefully considered the impact interest rate reductions have for both borrowers and savers,” Boyd said.

“We understand the importance of getting this balance right, particularly when household budgets are under pressure.

“We encourage our customers to talk to us about their savings as there are a range of options, including term deposits and bonus saver accounts, which may help them to save more in this environment, depending on their circumstances.”

Elsewhere, Kiwibank has cut its variable and offset variable home loans to 5.65% and its revolving loan to 5.7% and BNZ has cut its home loan rates by 15 basis points.

The Reserve Bank’s Monetary Policy Committee voted by five to one to reduce the OCR from 2.5% to 2.25% and any future moves in the rate would depend on how the outlook for medium-term inflation and the economy evolved.

“Risks to the inflation outlook are balanced,” the committee said.

“Greater caution on the part of households and businesses could slow the pace of New Zealand’s economic recovery.

“Alternatively, the recovery could be faster and stronger than expected if domestic demand proves more responsive to lower interest rates.”

Finance Minister Nicola Willis said families across the country would be encouraged by the Reserve Bank’s positive outlook for next year.

“It is clear previous reductions in the OCR are flowing through into stronger economic activity,” Willis said.

The minister also said Reserve Bank data showed 80% of mortgage lending had come up for renewal since the Reserve Bank began cutting the OCR in August last year.

“New Zealanders have had a tough few years, but things are looking up.”