ⓒ NZ Herald
ASB, one of New Zealand’s major banks, has announced a reduction in its fixed mortgage rates, following a recent cut in the Official Cash Rate (OCR). The move brings ASB’s rates more in line with those offered by its competitors.
The bank has implemented cuts ranging from 10 to 20 basis points (bps) across its six-month to three-year fixed-term home loans. Specifically, the one-year fixed rate has decreased by 20 bps to 5.79%, while six-month and two-year rates have also fallen by 20 bps, settling at 6.19% and 5.49% respectively. The three-year fixed rate saw a 10 bps reduction, now standing at 5.59%.
This follows a previous cut last week where ASB lowered its variable home loan rate by 50 bps to 7.39% and its orbit rate to 7.49%, mirroring the Reserve Bank’s 50 bps OCR reduction to 4.25%. ASB also decreased some term deposit rates by 10-20 bps.
While lower interest rates generally benefit borrowers, the reductions haven’t been as significant as some had anticipated. Reserve Bank Governor Adrian Orr acknowledged that global factors are influencing interest rates, preventing a direct correlation with OCR changes. Banks often factor in expected OCR cuts, mitigating the impact of immediate changes.
Historically, OCR adjustments haven’t always translated directly into equivalent mortgage rate changes across all terms. Floating rates and shorter-term fixed loans are more directly affected. Many major banks swiftly passed on the full 50 bps reduction to customers with floating rates.
Beyond the OCR, geopolitical factors play a crucial role in interest rates. Recent global events, such as the US presidential election and anticipated tax cuts, have introduced upward pressure on the rates banks pay to borrow internationally, ultimately impacting rates for New Zealand borrowers.
