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Banks are starting to move on mortgage rates following a clear message from Reserve Bank governor Alan Bollard.
Bollard made his expectations known to lenders during his official cash rate (OCR) announcement on Thursday, telling them he expected cuts in the OCR to benefit borrowers, particularly those on coming off fixed interest rates.
Bollard has been clearly unimpressed with the rise in longer term interest rates, describing them as "unwarranted".
In the announcement Bollard said the OCR would remain low, at around 2.5% or lower, until later in 2010.
NZI Business presenter Corin Dann says this will give borrowers confidence to stay on floating rates for a much longer period without needing to fix, and lenders the opportunity to confidently lower longer term interest rates.
Westpac was the first bank to announce a drop in lending rates, trimming its six-month home loan rate from 5.79% to 5.39%. While Rabobank New Zealand announced it will lower the variable base rate on its rural loans by 0.5% per annum, effective from May 15.
"An important implication of the OCR announcement is the signal from the Reserve Bank that it intends for interest rates to remain low for an extended period," says Westpac spokesperson David Cunningham.
Cunningham says that in the next 12 months over half of all fixed rate home loans - worth over $60 billion - will roll over.
"That has the capacity to move households from a current average interest rate for these loans of around 8.25% to rates nearer 6%, releasing an additional $1.4 billion per annum into the economy," he says.
The bank says it is reviewing its other rates.
Other major banks are yet to make announcements though it is
understood they are considering making lending cuts.
Compare mortage rates from the major banks
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Post new commentwoggle said on 2009-04-30 @ 15:47 NZDT: Report abusive post
question for those renting what does this mean should we be challenging our landlords as rent prices seem to continuously increase? if mortgage interest rates have come down dramatically it seems why are those in a situation where it has become more difficult to afford our own homes constantly being penalised?