Mortgage rates cut - ASB moves first

Source: NZ Herald

09 May 2008

ASB has moved to cut its key mortgage rates for the first time since the global credit crunch forced interest rates higher earlier this year.

The move signals the worst of the credit crunch could be over amid signs that a sharply slowing economy and labour market may force the Reserve Bank to cut the official cash rate as soon as next month.

ASB cut its key 2 year mortgage rate to 9.4 per cent from 9.7 per cent. It cut its 6 month rate to 9.75 per cent from 9.85 per cent and its one year rate to 9.4 per cent from 9.75 per cent.

“While the financial markets continue to be volatile, there has been a distinct reduction in the cost of funds across a broad range of terms. We are passing on this lower cost to our customers through adjusting our lending rates,” ASB Managing Director Hugh Burrett said.

ASB is the first of the major banks to cut its fixed mortgage rates, which almost 90 per cent of home buyers rely on to buy a house.

The move, if sustained, will be a huge relief for many homeowners with large mortgages who have faced rising mortgage rates, particularly in the last six months as the banks passed on the higher costs of wholesale funding because of the global credit crunch.