None of the major banks have cut mortgage rates in the wake of latest official cash rate cut with one ruling it out completely.

This morning Reserve Bank governor Graeme Wheeler sliced another 25 basis points off the cash rate bringing it to another record low of 1.75 per cent.

But so far none of the banks have moved to pass that cut on to mortgage holders and BNZ and Westpac have ruled out making any interest rate changes.

Last time the official cash rate was cut in August ANZ, Westpac, ASB and Kiwibank all announced rate changes on the day of the cut while BNZ moved the following day.


Most of the major banks sliced 5 or 10 basis points off their floating mortgage rates while Kiwibank made the biggest cut taking 20 to 25 basis points off its floating home loans.

At the same time the banks also increased deposit rates in a bid to attract more money coming in the door.

But as of 2.30pm none of the banks had made rate changes.

Simon Power, general manager of consumer bank and wealth at Westpac said the on-going cost of offshore funding provided no opportunity to lower home loan rates.

"The OCR is just one factor in assessing interest rates. Its importance is diminished when banks need to use offshore funds to cover the gap left by a lack of local deposits," he said.

David Bullock, acting director of retail and marketing at BNZ, said it would not be making any changes in response to the cut.

"We are not making any changes to interest rates today and it's a good time to remind people that interest rates aren't directly or solely linked to the OCR."

Earlier in the week BNZ increased its three year fixed mortgage rate following on from a move by ASB bank which increased its three, four and five year fixed term mortgage rates last Friday.


Bullock said despite the cut banks got their ability to lend from a variety of sources - most of which were getting more expensive - putting pressure on bank margins.

"One source is local deposits, and at the moment there are more people wanting home loans than there are people saving.

"So to encourage and attract more deposits (people's savings and terms deposits) we need to pay a sharper return to savers.

"And we still need overseas funds to fill the gap - and the cost of these remains volatile."

He said it was important to remember that home loan rates were still at historical lows.

Jose George, general manager of financial rating firm Canstar said the days of record low mortgage rates were over for now.

"We will not be reading anymore headlines about 'record low rates' for quite some time."

George said first home buyers would be the most affected by the increases in mortgage rates as most existing home loans were currently fixed.

Watch: Graeme Wheeler reaffirms decision to cut rate

The New Zealand dollar rallied by more than half a US cent after the Reserve Bank cut its official cash rate by 25 basis points to 1.75 per cent, based on market expectations that the move would be the last in the current easing cycle.

"With the popularity of fixed rate mortgages in New Zealand this is not going to be an immediate concern for many homeowners but once again we will see first time buyers disproportionately affected as the cost of borrowing, and therefore the cost of getting on the housing ladder, increases."

George said New Zealand consumers were putting less money into their savings and more into property which meant banks were having to increase their borrowing from overseas to support lending demand.

"The knock-on effect is that mortgage rates will continue to rise.

"With the vast amount of global uncertainty we are faced with - Brexit, US Presidency, China's economic outlook - today's OCR announcement could have minimal influence on the mortgage rates banks set.

"The financial institutions are looking much further afield in their considerations and I suspect, will continue to do so."

George said the future was also unclear for savers despite banks needing more deposits.

"Financial institutions need savers but how far they are prepared to go to attract them remains unclear.

"Recent increases in some deposit rates have not been sustained and I think rate increases may well remain sporadic as banks navigate the tricky global financial waters ahead."