Westpac and ASB join post-OCR wave of rate cuts

Leading banks Westpac NZ and ASB have been the latest to announce a series of mortgage rate reductions following yesterday’s OCR cut.

Westpac NZ reduced its choices floating rate by 16 basis points to 5.79% pa and its revolving choices everyday rate dropped by 11 basis points to 5.84% pa. These changes will become effective on May 10 for new customers and on May 30 for existing customers.

From May 10, Westpac NZ is also dropping its fixed special* 1-year rate by 16 basis points to 3.89% pa. Its fixed special* 2-year rate will be reduced by 4 basis points to 3.95% pa. The bank noted fixed special rates require minimum of 20% equity and a transactional account with salary. Business and investment purposed choices loans and package customers are excluded.

Read more: Westpac NZ reports record high half-year profit

Meanwhile, ASB has dropped its variable home loan rate by 0.10% from 5.80% p.a. to 5.70% p.a., and its Orbit home loan rate by 0.05% from 5.80% p.a. to 5.75% p.a. These changes are effective Wednesday 15 May for new customers and Wednesday 22 May for existing customers.

Westpac and ASB have become the latest banks to join the new round of rate cuts, with ANZ and Kiwibank having both dropped their mortgage rates moments after the OCR decision.

Following the OCR cut, Westpac economists believe floating mortgage rates are going to fall, and that there could be another round of reductions in fixed rates.

“Our view is that house price inflation will accelerate to something more like 7% per annum, and the housing market upturn will last longer than the RBNZ is forecasting,” Westpac chief economist Dominick Stephens said. “This view is not only based on low mortgage rates – the fact that the threat of a capital gains tax has disappeared is another reason to expect a housing market upturn.

“Because capital gains tax has been cancelled, we now think the housing market will be too strong in 2020 to warrant an OCR cut at that time,” he added.