Wellington, Jan 29 NZPA - Now is the time to buy, a vendor of home mortgage finance said as Kiwibank and Westpac led the latest round of mortgage rate cuts.
But it remains unclear whether the Reserve Bank's surprise 150 basis point cut in the Official Cash Rate (OCR) to 3.5 percent today will stimulate the housing market.
It certainly got existing home owners talking to banks about break fees on fixed mortgages taken out before the OCR came tumbling down 4.75 percentage points from its peak last year.
Locally owned Kiwibank today quickly announced its one-year fixed term rate is down from 5.99 percent to 5.69 percent.
Nearly as quick was Westpac, which said its floating rate would reduce from 7.49 percent to 6.89 percent and its one-year rate from 6.8 percent to 5.79 percent.
ANZ National cut its variable rate by 55 basis points to 6.95 percent, arguing that if a cut ahead of today's OCR was included the reduction was 125 basis points.
ANZ National also announced a range of cuts to fixed rates.
SBS Bank cut its floating rate to 6.45 percent and has its fixed rates under review. Rabobank said it would lower its variable base rate on rural loans by the full 1.5 percentage point.
Rabobank believed that agriculture would be less affected than other industries by global market conditions.
"Volatility in commodity markets has always been a part of farming," said Ben Russell, Rabobank general manager Rural New Zealand.
The OCR -- which influences the price of borrowing money in New Zealand -- is at its lowest level since it was introduced at 4.5 percent in 1999.
"Now is simply a good time to buy," said Shaun Riley, chief executive of Mike Pero Mortgages. The fall in one-year fixed rates to around 6 percent from near 10 percent a year ago put about $150 a week in the pockets of someone with a $200,000 mortgage.
But he said people were still wary about buying property.
Massey University's professor of property Bob Hargreaves said the momentum in the property market was still downward.
Unemployment is rising, banks are hoarding cash and first home buyers have to find bigger deposits.
David Tripe, director of Massey University's Centre for Banking Studies, said it may be better to break a fixed rate mortgage now than it will be next month as floating rates will fall further.
In time all fixed rates could be higher than floating rates.
"The lower the floating rate or corresponding shorter-term fixed rate drops, the bigger the break fee," he said.
Reserve Bank Governor Alan Bollard again urged banks to pass on the cut in the OCR.
He said banks mainly passed on the interest rate cuts and their balance sheets were complex.
"Margins have increased by some measure in the banks but on the other hand the volume of their business is down," he said.
Westpac's acting chief executive Bruce McLachlan said Westpac was aware of its responsibilities as a major bank and was committed to supporting its customers and the economy.
"It should be remembered that the OCR is not the specific rate at which we fund our lending business, although it does influence funding costs," he said.
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