ASB takes floating rate to historical low

ASB has reduced its floating home mortgage rate by 65 basis points taking it to 5.75% - the lowest its been in more than 40 years.

Friday, September 4th 2009, 3:20PM

Kiwibank and BNZ both cut their floating rates several weeks ago.

"This is our lowest home loan floating interest rate since December 1967, the year that decimal currency was first introduced in New Zealand," ASB chief executive Retail Banking Ian Park says.

It has also increased some fixed term home lending rates and lowered short term deposit rates.

"ASB's new lending rates have been rebalanced to reflect our cost of funds and the level of risk associated with each lending category," Park says.

"Our new interest rate structure reflects the changing cost of offshore funds, which we rely on to supplement the funds our local depositors entrust us with. Together these deposits cover the amount we are lending out to our customers.

"Whilst we have seen an easing in the cost of shorter term offshore funding rates, the cost of longer term funding is still high. There is also significant competition in the New Zealand deposit market, which is pushing these rates higher than they would otherwise be.

"This has led us to take the major step of overhauling all of our home lending and a small number of our short term deposit rates. We want to ensure our customers receive the maximum benefit possible from the lower rate structure the current market conditions are driving."

ASB says that a customer with a $200,000, 20-year floating rate mortgage will in future be paying $75 a month less.

It has also cut 30 points from its business and rural base rates, bringing the business base rate down to 10.55% and the rural base rate to 7.60%.

These new interest rates come into effect as from tomorrow for new loans, and on 28 September for existing floating and base rate loans.

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