15 Jan 2009

Kiwibank first to cut floating rate

5:40 pm on 15 January 2009

Kiwibank has become the first of the main trading banks to cut its floating mortgage interest rate.

The bank has cut its variable or floating home-loan rate to 6.99%, the lowest such rate offered by any of the main trading banks in nearly five years.

The last time a variable home-loan rate was this low was in May 2004.

Kiwibank chief executive Sam Knowles says home-loan customers have been watching to see whether there would be further falls in interest rates, as many fixed-term loans are due for renewal. Kiwibank's strategy is to keep pushing the floating rate down.

The move comes hours after Bank of New Zealand cut interest rates by between 0.2 and 0.9 of a percentage point on its standard fixed mortgages for two, three, four, five and seven years, bringing them into line with its competitors' rates.

ANZ and the National Bank cut their fixed-mortgage rates yesterday; Westpac and ASB cut theirs last month.

Economists are predicting more cuts yet. The Reserve Bank is expected to make further large cuts to official interest rates from later this month, thus reducing the cost of money borrowed by banks on wholesale money markets.