Small Banks Challenge Mortgage Rates By Cutting Interest

CBS Canterbury and PSIS have today cut their floating mortgage rates by a full 50 basis points, challenging the big four Australian owned banks and Kiwibank to follow suit in the wake of the Reserve Bank's 50 basis cut in the Official Cash Rate five days ago.

CBS Canterbury cut its floating rate to 6.45 per cent, which brings it into line with the major banks, but PSIS went further than the major banks by cutting its regular floating rate to 5.75 per cent, giving it the lowest variable rate on the market under Kiwibank on 5.99 per cent.

There is better-than-expected news on the housing sector as the Reserve Bank prepares to announce its interest rates decision later today.

Official figures show planning authorities approved the construction of almost 10,500 homes in March in seasonally-adjusted terms.

That is 3.5 per cent more than the month before.

CBS Canterbury has cut its variable and short term mortgage rates and 2-3 year term deposit rates, while at the same time raising its five year mortgage rate and 12-18 month term deposit rates. This follows the 50 basis point (bps) cut in the Official Cash Rate to 2.50% on Thursday last week and is the first cut in a variable mortgage rate by a New Zealand bank or building society since then.

PSIS announced it would cut its standard variable mortgage rate by 50 basis points to 5.75%, currently the lowest floating rate offered in New Zealand. New PSIS rates are effective from tomorrow. Other mortgage rate changes by PSIS include:

6 month: down 40 bps to 5.40%
1 year: down 25 bps to 5.50%
2 year: down 25 bps to 5.95%
3 year: down 20 to 6.50%
4 year: down 20 to 6.95%
Revolving credit: down 50 bps to 5.25%

Various Australian sources and those from New Zealand have contributed to this story. They include Interest.co.nz and ABC Australia.