Banks quick to cut floating rates

ASB, ANZ, Kiwibank and The Cooperative Bank have all dropped their floating mortgage rates after a cut in the benchmark interest rate, with the rest of the pack expected to follow.

Yesterday morning the Reserve Bank cut the Official Cash Rate (OCR) from 3.5 per cent to 3.25 per cent.

ASB immediately dropped its floating mortgage rate from 6.75 per cent to 6.50 per cent, while Kiwibank dropped its rate from 6.65 per cent to 6.4 per cent.

ANZ followed soon afterward, cutting its floating rate to 6.49 per cent, as did the Co-operative Bank, which cut to 6.45 per cent.

The changes at each bank come into effect on varying dates, with ANZ’s existing customers having to wait until the end of the month before they reap the benefits.

Massey University banking expert David Tripe said the other banks would inevitably follow suit with cuts.

With some fat to trim in the old floating rates, he said, the real question was whether any lender was bold enough to cut by more than 25 basis points.

Although most borrowers have switched to cheaper fixed terms over the past few years, Kiwis have a collective $53 billion worth of floating mortgage debt.

On a home loan of $400,000, the interest rate cuts will result in savings of about $1000 a year.

Floating mortgage rates are closely tied to changes in the OCR, while fixed rates are linked to the longer-term ‘‘swap’’ rates between banks.

ANZ chief economist Cameron Bagrie said those wholesale interest rates had fallen, suggesting fixed mortgage rates could also ease.

‘‘Banks, I suspect, will be monitoring things. Time will tell.’’

Westpac chief economist Dominick Stephens agreed.

‘‘I don’t know the timing, but I suspect there’ll be a drop,’’ he said.

ANZ said it would not be making any changes to its fixed home loan and deposit rates, but ASB said its other rates were currently under review.

More good news for mortgage holders could be in store, with the Reserve Bank likely to cut rates again.