Rate cut holds hope of cheap mortgages | Rotorua News | Local News in Rotorua

Rotorua home buyers could benefit from the latest official cash rate cuts.

Reserve Bank governor Allan Bollard slashed the official cash rate (OCR) by an unprecedented 1 per cent to 6.5 per cent yesterday citing "ongoing financial market turmoil and a deteriorating outlook for global growth".

Kiwibank, ASB and TSB have all responded, bringing some lending rates below 8 per cent.

Rotorua mortgage lender Peter Roberts, of Wizard Home Mortgages, said it was "exciting news" when combined with the current buyers' property market.

"We have gone through a stage of doom and gloom but this does provide some light at the end of the tunnel. People can go into their holidays with perhaps a bit more certainty."

He said people should gain as much knowledge as they could from reliable sources before contemplating breaking their current mortgages to capitalise on the new rates.

"People would have to sit down and work out whether the savings would offset the costs."

Stephen Graham, BDO Spicers Rotorua partner, agreed breaking an existing mortgage could be surprisingly costly.

He said most people would not see an immediate difference.

"About 80 per cent of New Zealand mortgages are fixed for one to five years so it could take some time to trickle down." The people likely to benefit now were new borrowers - and those with floating rates or fixed terms coming to an end.

Red Stag executive chairman Phil Verry says the 1 per cent cut still leaves Kiwi borrowers paying more for their money than Australians, resulting in an exchange rate that is making a difficult time even tougher for exporters and manufacturers.

"Why should New Zealand borrowers be paying a higher rate than Australians to essentially the same banks? It is affecting the exchange rate, which is affecting exporters when market conditions are difficult enough as it is."

Australian rates have already dropped below 6 per cent for 90- and-180 day bills.

Mr Verry said a more level playing field was essential to creating the business growth that would do more for economic recovery than monetary policy.