The Reserve Bank has cut the official cash rate to its lowest level in three years. Photo: RNZ
Just minutes after the Reserve Bank revealed it would cut the official cash rate (OCR) by 25 basis points to 2.25 percent, advertised home loan rates started to drop.
The Co-Operative Bank said it was dropping its floating home loan rate by 31 basis points, more than the Reserve Bank reduction, to 4.99 percent.
Chief executive Mark Wilkshire said it "affirms our commitment to competitive interest rates".
Westpac said it would cut its variable home loan rates by 20 basis points and most of its variable business rates by 25 basis points.
Managing director of product, sustainability and marketing Sarah Hearn said nearly 90 percent of customers were on a fixed rate. Westpac is offering rates below 5 percent on terms between six months and five years.
Kiwibank and BNZ said they would cut variable home loan rates by 15 basis points.
ANZ was cutting variable rates for home loans and business flexible lending by 20.
ASB has cut its floating rates by 20 basis points.
"We know that every little bit helps as we head into the holiday period, and the reductions we've made to our variable home loan rates should be welcome news to customers," said executive general manager of personal banking Adam Boyd.
"We have carefully considered the impact interest rate reductions have for both borrowers and savers. We understand the importance of getting this balance right, particularly when household budgets are under pressure."
It is expected that there may be some other retail reductions - but further cuts to the OCR may be limited.
The Reserve Bank has left open the possibility, depending on the outlook for medium-term inflation and the economy.
It has a forecast rate track of 2.2 percent next year, which indicates it seems some - but limited - possibility of more cuts.
Infometrics said it reinforced its view that 2.25 percent was likely to be the low point of the cycle.
"By the time of the next review on 18 February, we expect further positive indicators will make it clear the economy is recovering and that no further cuts are necessary."
ASB agreed it was likely the OCR would remain on hold for now.
"Remaining on hold is contingent on the economy picking up as expected. So, how the summer data flow pans out will be key."
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