9.15am 23/10/08 The Reserve Bank has slashed the official cash rate (OCR) this morning by a full 1%.
He has also indicated a bias towards further rate cuts going forward.
He noted “New Zealand can expect to face lower demand for exports and credit is likely to be less readily available”.
Under normal circumstances one would expect home loan Floating interest rates to drop by 1% forthwith.
Lets see what the Banks actually pass on to customers.
11.45am 23/10/08 ASB Bank has announced rate cuts across all fixed interest rates.
The most notable being 6 months fixed down from 9.25% to 7.99%.
Unusually there is no change to their floating interest rates though.
6.20pm ANZ has announced fixed interest rate declines. But also no change to their floating interest rates.
Westpac announced a floating interest rate decrease but no changes to fixed interest rates.
Kiwibank has cut their home loan interest rates across the board.
We expect some further jockeying for position over the next week amongst the banks.
5pm 24/10/08 ANZ have followed up today with full 1% cuts off floating and revolving credit interest rates.
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.
Due to current market conditions there have been a number of reductions in levels that lenders are prepared to lend to. It has mainly been with the “Low Doc” or “No Financials” variety of loans.
In addition “servicing criteria”, an applicants calculated ability to cover the monthly cost of a loan, has been tightening too.
Some, but not all, are as follows…
ASB low doc was 80% this changed last Friday to 60%, and we have just heard that as of today its now zero %…IE: no low docs!
UPDATE 3.30pm ASB is restricting all housing lending for new customers to 80%
Westpac low doc was 85% now 65%
In addition some lenders are showing reluctance to lend on apartments, unsurprisingly given the recent waves of negative publicity.
Sovereign, a lender we have regularly used for apartments in the past, won’t currently lend anything on an apartment in a building with more than 3 floors.
Kiwibank is also not doing low doc loans on apartments.
Still a round of tax cuts went into your paycheck on the 1st of October, so it isn’t all bad. 😆