Westpac has lowered its interest rates - but other banks have not passed on the 0.5% cut in the Offical Cash Rate.
From Friday, Westpac will cut 0.4% from its six-month, fixed-rate home loan, bringing the rate down to 5.39%.
But ASB's head of interest rates Ian Parks says borrowing overseas remains expensive and this makes it difficult to lower rates across the board.
Independent economist Bryan Gaynor says he does not expect banks to drop their long-term interest rates despite the fall in the Official Cash Rate.
Mr Gaynor says rates will not drop until demand for housing does. If people stop buying property, long-term rates could fall, allowing cash-strapped businesses that need to borrow to expand and stay afloat to have access to cheaper rates, he says.
The Reserve Bank lowered the rate from 3% to 2.5% on Thursday.
Governor Alan Bollard said he hoped the cut would take the pressure off mortgage rates.
Dr Bollard said the world economy deteriorated further than expected in the first quarter of 2009 and "adverse economic forces" are expected "to remain dominant" throughout 2009.
He said it is likely to be some time before economic activity returns to robust and healthy levels.
He expects the rate to stay at 2.5% until the end of next year, but it "could still move modestly lower".
The rate is the lowest since the Official Cash Rate was introduced on 17 March 1999. It was then 4.5%.
The Minister of Finance says he expects to see floating and short term interest rates come down following the cut.
Bill English says the Reserve Bank and the Government are doing all they can to cushion New Zealand against the worst effects of the recession and get the economy growing again.
He says many households haven't yet felt the benefit of lower interest rates but they will over the next 12 months.
On 12 March, Dr Bollard indicated he had almost finished cutting the rate and any further cuts would be small.
The OCR has been lowered in a series of cuts since 24 July 2008. It was set at 8.25% on 13 September 2007. The previous rate was set on 12 March 2009.
Investigation into banks' break fees continues
A Commerce Commission investigation is continuing into the way three banks calculate their break fees for home mortgages.
The commission on Thursday cleared four banks, saying the formula they used is likely to be appropriate.
Banks charge a break fee to recover the loss when a customer pays off a loan early or wants to renegotiate the terms.
The Commerce Commission has been checking whether the formulas used comply with the Credit Contracts and Consumer Finance Act.
The commission has cleared ASB, SBS Bank, BNZ and the National Bank, saying they calculated the fees based on the movement in retail interest rates and it won't take any further action against them.
But it says its investigation into three other banks, ANZ, Kiwibank and Westpac, is continuing.
