ASB slashes floating mortgage rate to 5.75pc

ASB says its floating mortgage rate is the lowest in more than 40 years. Photo/Glenn Jeffrey.

ASB has slashed its floating home mortgage rate by 65 basis points from 6.4 per cent to a market-low rate of 5.75 per cent, which it said was its lowest floating rate in more than 40 years.

ASB's move appears to break a log-jam formed by the major banks who had refused to cut their floating mortgage rates after recent reductions in the Official Cash Rate.

This rate is below BNZ's current lowest floating rate of 5.85 per cent, Kiwibank's 5.79 per cent, ANZ and National Banks' 6.45 per cent and Westpac's 6.49 per cent. See all the bank mortgage rates here.

The move also follows criticism by the Reserve Bank and politicians that banks had not passed on enough of the recent cuts in the OCR to short term mortgage rates.

ASB said it had also cut its business and rural base rates by 30 basis points, bringing the business base rate down to 10.55 per cent and the rural base rate to 7.6 per cent.

The new rates come into effect from Saturday for new loans and from September 28 for existing loans.

"This is our lowest home loan floating interest rate since December 1967, the year that decimal currency was first introduced in New Zealand," said ASB's CEO of Retail Banking Ian Park.

ASB said it had also fine tuned some fixed mortgage rates and short term deposit rates.

"ASB's new lending rates have been rebalanced to reflect our cost of funds and the level of risk associated with each lending category," Park said.

"Our new interest rate structure reflects the changing cost of offshore funds, which we rely on to supplement the funds our local depositors entrust us with. Together these deposits cover the amount we are lending out to our customers," Park said.

"Whilst we have seen an easing in the cost of shorter term offshore funding rates, the cost of longer term funding is still high. There is also significant competition in the New Zealand deposit market, which is pushing these rates higher than they would otherwise be."

"This has led us to take the major step of overhauling all of our home lending and a small number of our short term deposit rates. We want to ensure our customers receive the maximum benefit possible from the lower rate structure the current market conditions are driving."

ASB has kept its 6 month fixed home lending rate at 5.50 per cent.

Its 12 month, 18 month and 2 year fixed rates have increased by 0.2 per cent to 5.70 per cent, 6.30 per cent and 6.75 per cent.

The 3, 4 and 5 year fixed rates have increased by 0.3 per cent to 7.75 per cent, 8.25 per cent and 8.6 per cent.

INTEREST.CO.NZ