The Reserve Bank's monetary policy committee took the decision to vote on whether the OCR should be cut by 25 or 50bps. Photo: RNZ
Banks have started to move their home loan rates after a cut to the official cash rate.
The Reserve Bank cut the official cash rate by 25bps to 3 percent on Wednesday, as widely expected.
But what came as a surprise was news the monetary policy committee took the decision to a vote on whether the cut should be 50bps or 25.
ANZ said on Wednesday afternoon it would cut its floating rates.
It will drop its floating and flexible rates by 20 basis points to 6.29 percent and 6.40 percent, respectively.
About 12 percent of ANZ NZ's home loans are on floating rates, with the vast majority on fixed rates.
Westpac said it was introducing a rate of 4.75 percent on one-year, 18-month and two-year terms.
It will also decrease its three- and four-year special rates. It is also cutting its variable home loan rate by 20 basis points.
Kiwibank also said it would cut its variable rate by 20bps.
The Reserve Bank has also lowered its forecast track to indicate a 2.6 percent OCR through next year.
It now predicts an eventual trough of 2.55 percent, not the 2.85 percent it had forecast.
Because the bank cuts in 25bps increments, that indicates it thinks it is possible that the rate could drop to 2.5 percent.
Squirrel chief executive David Cunningham said that was likely to mean that one-year swap rates dropped 15 to 20bps in the near term and could bring one-year home loan fixes down to 4.5 percent over the next month or two.
He said the market was likely to be surprised by the fact that a 50bps cut was considered.
Jarrod Kerr, chief economist at Kiwibank, has been a vocal proponent of getting the rate to 2.5 percent.
"Then hopefully things start picking up because what we've seen so far is relief - business going 'thank God I'm not paying interest rates that I was paying last year. But it's not at levels that get them excited and get them to invest.
"The Investment Boost from the government is great but you need businesses willing to spend money on the investment and they're not and I think interest rates are part of that."
ANZ senior economist Miles Workman said banks had moved interest rates ahead of the OCR so they might not shift a lot in the immediate term. But he said there should be an impact on floating rates.
Infometrics principal economist Nick Brunsdon agreed the 25bp cut had been fully priced into home loan rates in cuts over the past two weeks.
"Immediate cuts are unlikely to follow today's announcement.
"However, there were broader signals in the Reserve Bank's announcement which imply further cuts to the OCR - and home loan rates - later this year. The Reserve Bank's projection effectively allows for two further 0.25 percent cuts before 2026. Markets won't treat this as a dead certainty, but we would expect to see banks to start moving rates part of the way down before the next review in October."
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