More banks set to cut lending rate

04:16, May 10 2012

As banks move to drop home loan rates to record lows, financial literacy advocates say customers should not hesitate to bargain for the best deal possible.

ANZ and National dropped their one-year fixed rate today to the lowest it has been in 17 years, and more banks are expected to follow in their stead.

David Kneebone, executive director at the Commission for Financial Literacy & Retirement Income, said people should shop around and ask banks to match rivals' rates.

"I think where we're at now is that consumers have got a bit more power back. Don't hesitate, ever, to talk to more than one lending organisation," he said.

"They can only say no."

He also said the changes should spark some people to reassess their situation, as it would be "remarkable" for interest rates to remain low in the mid to long term.


"There's a number of New Zealanders who have moved to floating rate mortgages in the last two to three years." he said.

"This is the sort of opportunity that might inspire some to consider a fixed rate again."

Rather than "frittering away" any savings made by the switch, it would be best to repay other debt or put it back onto the mortgage, he said.

As of today, ANZ National's one-year fixed rate has been slashed 40 basis points to 5.25 per cent, the lowest "carded" rate available.

That is beaten only by Kiwibank's special 4.99 per cent rate, which requires customers to have at least 30 per cent equity in the property.

New Zealand Institute of Economic Research principal economist Shamubeel Eaqub expected other banks would make similar moves as they ''typically move in flocks''.

Eaqub said about a third of households had a mortgage, but most people had a floating-rate mortgage, rather than a fixed rate one, so the changes would only affect a small proportion of people.

ANZ retail managing director Kerri Thompson said the bank was taking advantage of a window for cheaper longer term wholesale interest rates, and passing it on to customers.

''We're not sure how long this window will remain open,'' she said. ''We hope to be able to keep it open for a while but we'll be reviewing it on a daily basis.''

However, the banks' six-month term deposit rates will also be cut by 30 basis points to 4 per cent today. Other savings products are unaffected.

ANZ National's move came a day after Southland lender SBS and its sister bank HBS dropped their three- and five-year home loan interest rates to market-leading lows.

The banks now offered a five-year rate at 6.20 per cent, down from 6.90 per cent, and a three-year fixed rate of 5.85 per cent.

The rates shift also comes ahead of next month's Reserve Bank review of the official cash rate.

The market had priced in as much as an 80 per cent chance that the central bank would cut rates to a new low of 2.25 per cent, but expectations have since been pared back.