Banks cut mortgage rates to new lows

WELLINGTON: Two major banks have cut their home loan rates to less than 3% — a record low in New Zealand.

However, the move will be cold comfort for the thousands of Kiwis who have deferred payments on their mortgages because they cannot afford them at the moment.

Stateowned Kiwibank announced late Thursday it would cut its oneyear fixed term rate from Monday to 2.99%, down from 3.09%.

The bank said it would be its first ever sub3% home loan interest rate.

Kiwibank general manager of product Nicole Pervan said the move was about providing value to customers.

‘‘Customers with a fixed interest rate expiring within the next month are likely to roll on to a new interest rate 1% lower than their current rate.

‘‘On an averagesized loan this will reduce repayments from $50 to $70, which will go a long way at this time. Customers have the flexibly to pay off their loan faster or keep that money in their back pocket for a rainy day.’’

That move was followed by ASB, which cut its twoyear fixed term rate to 2.99%, down from 3.49%, a decision effective from yesterday.

ASB executive general manager retail banking Craig Sims said the reduced rate would help Kiwis manage their home loans during what had been a challenging period, as well as support others into homeownership.

‘‘This has been a difficult time for a lot of our customers. While we have put in place a number of support options, including mortgage repayment deferrals and interestonly payments, we’re continually evolving what we are doing to help Kiwis get through the impact of Covid19. Offering this twoyear special rate is part of that.’’

ASB chief economist Nick Tuffley said lower home loan rates would help boost the economy.

‘‘The Reserve Bank has taken concerted actions to push interest rates down, and these are clearly bearing fruit by enabling mortgage rates to fall to even lower levels,’’ Mr Tuffley said.

Lower interest rates would put cash into people’s pockets, helping to stimulate and restart the economy, he added.

‘‘Lower borrowing rates will also help to further alleviate any financial worries that borrowers may have.’’

However, the rate cuts will do little to help those who have had to defer payments on their home loans.

As of an update posted on Thursday on the New Zealand Bankers’ Association website 105,035 loans, totalling $36.9 billion, had been reduced or payments deferred on them.

Those loans include home loans, personal lending, credit cards and arranged overdrafts.

The bank interest rate cuts come before the Reserve Bank’s official cash rate review next Wednesday.

The OCR is already at a record low of 0.25% and the central bank has locked that rate in for at least 12 months.

However, some economists are predicting the rate will be cut again this year and could go into negative territory.

Property prices are also expected to fall; experts have predicted an 8% slump in Auckland and a 7% fall in Christchurch.

Despite the predicted house price slump, the majority of experts surveyed did not think it was a good time to buy property.

Kevin McHugh, Finder’s publisher in New Zealand, said job security remained key for first home buyers eager to pounce while prices were down. — The New Zealand Herald