6 May 2009

Small banks drop interest rates

10:10 am on 6 May 2009

Two of New Zealand's smallest lenders have cut their home loan interest rates following a drop in the Official Cash Rate last week - but most of the big banks are not following suit.

CBS Canterbury and PSIS announced cuts on Tuesday. However, ANZ National, the BNZ and Kiwibank say they're "monitoring" rates.

Westpac was the only major bank to cut any of its rates in response to the lowering of the OCR on 30 April, from 3% to 2.5%.

PSIS has cut all its rates. Lending portfolio manager Margot King says it now offers the most competitive floating rate among registered banks, at 5.75%.

CBS Canterbury has reduced its floating, six month and 12 month rates though its longer-term rates remain firm.

Since July last year, the Official Cash rate has been lowered from 8.25% in a series of cuts by the Reserve Bank. The rate was cut to 8% on 24 July.

Governor Allan Bollard said on 30 April that the Reserve Bank expects to keep the OCR "at or below the current level until the latter part of 2010."

Dr Bollard also said the Reserve Bank expected the decline in the OCR over the past year to "pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing."