The country's largest bank, ANZ, is passing on just a fifth of today's Reserve Bank interest rate cut to mortgage borrowers and is urging people to pay down debt and save more.
"Record low interest rates are an opportunity for households to pay down their home loans and to focus on saving," ANZ New Zealand CEO David Hisco said today.
Hisco's comments follow on from his recent unusual move of writing a newspaper article that outlined his current thinking on the property market and the economy.
ANZ announced today it will lower floating home loan rates by 0.05% p.a. to 5.59% p.a. but will increase rates for some term deposits by up to 0.30% p.a. to 3.60% p.a. in response to the Reserve Bank’s official cash rate cut.
To "continue support for the business community, particularly farmers", floating rates for Commercial, Agri and Business loans will be reduced by 0.15% p.a.
Westpac was the second bank to move, saying it's cutting its floating mortgage rate by 10 basis points to 5.65%, with the reduction applying to its Choices Floating, Choices Everyday and Choices Offset rates. The cut is effective for new lending from Friday, August 12, and from August 31 for existing customers. Westpac's also introducing a "special" six month term deposit rate of 3.50%, an increase of 50 basis points on its existing six month term deposit rate, effective Friday August 12.
ASB has matched the Westpac move in an announcement at the end of the day.
Hisco said ANZ was "refocusing" its lending and borrowing emphasis.
“On the deposits side, we have five times as many customers as those with home loans. Lifting term deposit rates will help customers grow their savings,” Hisco said.
“We are sending a strong signal today to New Zealanders that at a time of record low interest rates, it is more responsible to pay down home loans and save, than borrow more. New Zealanders need to consider changing their financial strategies.”
So that first home buyers weren’t disadvantaged by the changes, ANZ was also today launching a "special home loan package".
Only available to first home buyers using KiwiSaver, it will include a 0.20% p.a. discount on the prevailing ANZ standard variable interest rate and access to ANZ Buy Ready, a comprehensive set of tools, resources and special benefits to help people through the house purchase process.
“The Reserve Bank’s decision to cut the OCR to try and drive the New Zealand dollar lower is the right move to protect our export industries which employ many Kiwis,” Hisco said.
“Dramatically lowering lending rates would only throw fuel on the fire in an overheated housing market. That would be irresponsible and negate any economic benefit to New Zealand and drive up the country’s debt as banks seek expensive offshore funding for increasing home loan books.
“While this may mean we write fewer investment loans, we believe it is the right thing to do.
“Meanwhile, we still want to help first home buyers and commercial, agriculture and business customers.”
He said ANZ would monitor the impacts of this decision and may adjust its market position in future to ensure it remained competitive.