ASB cuts mortgage rate

[Jumpin]

ASB has defied expectations and cut its two-year fixed rate in response to the Reserve Bank's decision to lower the official interest rate by 25 points to 8 per cent, the first such reduction in five years.

http://www.stuff.co.nz/4629908a13.html

[essence]

Rates

Bank Direct (a subsidiary of ASB) have lowered their 18 months, 2 year, 3 year & 5 year rates, to keep themselves competitive.

Use http://www.goodreturns.co.nz/section/200.html to keep up to date with what the banks are doing.

[Jumpin]

What I thought was interesting in the article was that there was expectation of OCR as low as 5.5% not too far away.!!

Quote
Reserve Bank governor Alan Bollard had expected that lowering the official rate would only stop mortgage rates rising as banks faced rising costs on international money markets.
Economists thought it would take a series of rate cuts totalling 75 basis points for homeowners to benefit.
"Borrowers should not yet be dancing in the streets," said Stephen Toplis, of the Bank of New Zealand.
He expects a series of cuts to reduce the official cash rate to 7.25 per cent by the end of 2008, falling to 5.5 per cent by the end of 2009

[essence]

This just in.

Press Release
ASB lightens the load for New Zealand families
Friday, 25 July 2008

In the wake of the Reserve Bank of New Zealand’s decision to lower the Official Cash Rate to 8%, ASB has announced they would drop its two year fixed home lending rate by 0.25% to 8.95%. The two year fixed rate is the most favoured term for New Zealand homeowners.

Oh rubbish!!! This is the most favoured term BY THE BANKS. The public have been misled to think that "it's in their best interest" to lock in for this period of time.

“This is the first time in five years the OCR rate has decreased. Wholesale rates immediately fell as a result of the announcement and with the higher petrol and food prices New Zealand families are having to pay at the moment, ASB is keen to pass on this lower cost of funding to our customers,” says Peter Hall, Head of Business Ventures, ASB.

ASB is currently reviewing its other mortgage rates as a result of the change in the OCR. While floating rates are also under review, ASB is the only major bank to have held this interest rate at 10.75% over the past four months.

Bold highlighting is mine.

[jporteous]

Falling to 5.5% by the end of 2009

Quote
"Borrowers should not yet be dancing in the streets," said Stephen Toplis, of the Bank of New Zealand.
He expects a series of cuts to reduce the official cash rate to 7.25 per cent by the end of 2008, falling to 5.5 per cent by the end of 2009

Assuming this is correct - what do PTs believe will be the flow-on impact re the buying decisions of investors & home buyers?

Jono

[muppet]

From Tony's weekly newsletter:

If I Were a Borrower What Would I Do?
I would still be inclined to fix for a one-year period and any thoughts one might have had of seeking extra
security from a two year rate or longer should be well kicked into touch. We are however nowhere near the
time for simply floating one’s mortgage as the speed of falls in fixed rates will be constrained by the
international credit crisis.

[67910241]

Assuming this is correct - what do PTs believe will be the flow-on impact re the buying decisions of investors & home buyers?

Jono

Assuming this is correct, which it might well be, having any NZ dollars or any hard asset liquid in NZ dollars only is risky until such a trend is complete.

Judging by how Bollard has done things before, it could be a gentle and long downhill slope for the NZD.