Rates drop, relief still distant
![More home loan rate cuts](https://cdn-res.keymedia.com/cdn-cgi/image/w=1000,h=600,f=auto/https://cdn-res.keymedia.com/cms/images/us/076/0343_638572710865546165.png)
ASB has entered the rate cut fray, lowering all its fixed home lending terms.
The move makes ASB the first major bank to have all its fixed mortgage rates below 7% since June last year.
ASB’s six-month rate drops 25 basis points to 6.99%, and the one-year fixed rate drops 29 basis points to 6.85%, RNZ reported.
The 18-month rate falls 20 basis points to 6.69%, and the two-year rate drops 26 basis points to 6.49%.
The five-year rate sees the most significant drop, falling 40 basis points to 5.99%.
Rate cut impact on borrowers
For a borrower with a $500,000 mortgage over 30 years, the drop in the one-year rate equates to about $20 a week in savings.
Adam Boyd (pictured above), ASB’s executive general manager of personal banking, explained that the decision was prompted by falling wholesale rates.
“It's been a challenging period for many New Zealanders, and we’re pleased to be able to provide some relief in the form of lower home loan rates,” Boyd said.
Followed by other banks
The rate cut follows similar moves by Westpac, ANZ, BNZ, and Kiwibank after the Reserve Bank’s latest official cash rate update. However, the rate drops may take time to translate into tangible relief for borrowers.
Timing of relief
Reserve Bank data indicated that out of $263.529 billion in owner-occupier home loans, $50.3bn will refix within three to six months, $70bn within six months to a year, and $52bn within one to two years.
Kiwibank chief economist Jarrod Kerr said that while shorter fix terms have become more common, making the impact of rate cuts felt more quickly, the effect is still not immediate.
“The Reserve Bank’s out there saying historically it's an 18-month sort of thing [for rate cuts to be felt]... but what we've seen is many customers fixing for six months or a year,” Kerr said. “That has shortened it up a bit. But most people are on some sort of fixed rate. There's only 10% of mortgages on floating.”
Psychological impact
Despite the delayed financial relief, falling interest rates can have a positive psychological impact on borrowers.
“Just knowing interest rates are falling is also quite important,” Kerr said.
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