The Reserve Bank of Australia has this afternoon cut its official cash rate by a full 1%. This was an unusually large move and unexpected by the market.
Our Reserve Bank has an OCR announcement on the 23rd of October. A rate cut here is now a certainty. By how much is the question. The reality is that NZ is officially in recession and as such it could be argued aggressive rate cuts are required here, as opposed to Aussie which is not officially in recession.
A smart move, to restore confidence in our markets, may have been to co-ordinate their forthcoming expected rate cut with Australia’s move today.
Interestingly Glen Stevens, the Aussie Reserve bank governor has been actively in the press in Australia recently applying public pressure on the banks to pass on the rate cuts to customers. Conversely here in NZ there is remarkable silence on the issue from anyone in a position of authority. Why.??
The July 24th rate cut here was not passed on at all to home loan customers.
In addition most revolving credit facilities (which i would expect would be the majority of floating interest rate loans in New Zealand) only received 0.25% of a cut from the 11th of September drop in the OCR of 0.50%. And further if your an existing customer with one of these facilities you are probably still waiting for this benefit as most of the banks haven’t passed this on immediately. ANZ for example is not applying the cut until the 10th of October for existing customers.
The bottom line is…if you have a home loan coming up for re-fixing in the near term, do nothing until after the 23rd of October. Floating interest rate rate adjustments will then be known quite quickly but it can take a few days after the announcement for drops in short term fixed interest rates to come through once the banks have jostled amongst themselves.