There's been a rush to lower mortgage rates over the last couple of days, following the Reserve Bank's decision to cut the Official Cash Rate.
WestpacTrust, which had already dropped its floating mortgage rate to 8.25 per cent well in advance of the OCR move, has just shaved all its fixed rate mortgages by as much as 0.25 per cent. It's also offering a special nine-month rate of just 6.85 per cent.
Non-bank lender Cairns Lockie was another to prune its rates, reducing its floating mortgage by 25 basis points to 8.0 per cent. Director James Lockie said this was the first time floating rates had been at eight per cent or below since the middle of last year.
Meanwhile, the other main banks were quick to move their floating rates down from 8.5 per cent to 8.25 per cent following the OCR announcement, trimming some fixed rates as well. Along with the OCR cut, lenders cited lower global wholesale interest rates, largely in response to the slowdown in the US economy (see our rates table for more details).
The OCR, which dropped from 6.50 per cent to 6.25 per cent on Wednesday, had actually remained unchanged since May last year. This was also its first-ever reduction since being introduced in March 1999, at 4.50 per cent.
Looking ahead for floating and short-term fixed mortgage rates, they could well be close to their lows by now. Deutsche Bank says that the market is pricing in further OCR cuts of a total 0.50 per cent at the April and May reviews, "implicitly expecting a significant further deterioration in the global outlook relative to RBN assumptions". However, Deutsche Bank economists aren't so sure and say that, while global developments will be the key factor driving further rate decisions, domestic data and their implication for our inflation outlook shouldn't be underestimated.
