Westpac Bank has matched yesterday's move by rival ASB Bank and lowered its key 2-year fixed mortgage rate.
It dropped the rate by 25 basis points, or a quarter of one per cent, to 8.95 per cent, effective Monday.
The move comes after the Reserve Bank yesterday cutthe Official Cash Rate (OCR) by a similar amount, the first cut in five years. Many did not expect banks to move so quickly on the mortgage front, since the global credit crisis had made it more expensive to raise money.
Bollard's cut yesterday was seen as a move to forestall pending mortgage rate increases by the banks. Instead two of the largest banks have now cut rates, possibly a reflection of competitive tension between them more than a direct response to the OCR move.
"We continually review our pricing looking at a variety of factors including the cost of funding and the competitive landscape," a Westpac spokesman said.
"The OCR reduction announced by the Reserve Bank on Thursday has provided an opportunity for us to move on this term and pass on some of the benefit to our customers."
"We will continue to review other borrowing and lending rates going forward."
Money markets are now betting that Reserve Bank governor Alan Bollard will keep cutting rates at least another five times, which would lower the OCR to 6.75 per cent.
