KEY POINTS:
The BNZ, which will today follow rivals ASB and ANZ National in cutting key mortgage rates, says competitive pressure is the main reason, not any decrease in the cost of funds.
BNZ will move most of its fixed-term home loan rates, including its two-year "classic" rate by 20 basis points to 8.99 per cent and its "standard flybuys" two-year rate by the same margin to 9.09 per cent.
It is following the lead of ANZ National and ASB, which was the first to cut last week after the Reserve Bank's 25 basis point cut to the Official Cash Rate.
Until ASB moved, the Reserve Bank's move was not expected to have much of an effect on mortgage rates, which economists said were being driven largely by the cost of funds on international markets.
While accepting that underlying "swaps" rates which are a factor in the cost of international funding had eased in response to the Reserve Bank's cut, BNZ general manager of strategy and marketing Blair Vernon said his bank's move today was largely a competitive response.
Some of BNZ's rivals had a "low margin, high growth strategy" and had to keep writing more loans to keep their business moving.
The cuts in the past week were part of an ongoing "local battle for volume in a market where volumes are declining so rapidly ... We're driven into a position where we've got to remain competitive".
This week ANZ National chief executive Graham Hodges similarly said the cuts by ASB and his bank "attest to the competitive nature of the New Zealand marketplace".
However, both Vernon and Hodges warned that the fallout from the credit crisis was by no means over and rates were unlikely to fall significantly any time soon and could actually rise.
Vernon was not expecting to see the spring home loan campaigns that have been a feature of the mortgage market in recent years.
