Not all good news following Official Cash Rate cut

The Official Cash Rate (OCR) has been cut to a new record low of just 1 percent.

The drop is bigger than expected and will be welcomed by borrowers.

But it's not all good news - especially for those with savings. 

It was a cut of 0.5 percent - double what was anticipated. With that - the financial situation of some retirees could change dramatically. 

"We're all powerless here," retirement village resident David Tolmie told Newshub. "We can't really do anything. 

"If they're going to lower the interest rate, we're going to lose out."

That's because Tolmie has savings in a term deposit - and banks may now move further to cut interest rates on those accounts. 

Another retirement village resident, Judith MacKenzie, has abandoned her term deposits altogether, saying it's no longer worth it. She told Newshub she's invested in New Zealand businesses instead. 

"I see the profits being made by the big banks and I look at the interest rates that are being paid on term investments and I just opted out," she said. "I thought it was totally unfair and unreasonable."

Retirement village resident Kath O'Sullivan, 93, has $100,000 in a term deposit. But even before today's OCR cut, the interest gained was insignificant. 

But she sees there's a positive as well. 

"If my interest rates go down, so do my children, grandchildren's mortgages and I'm on the way out - and they're on the way up," she told Newshub. 

Simplicity chief executive Sam Stubbs said overall, housing will become more affordable.

"I think you're going to find a lot of New Zealanders who are renting at the moment have a serious look at buying a house because the interest rate on the mortgage will be less than the rent."

The best way to smash debt for those grappling with a massive home loan

Kiwibank's Mark Wilkshire told Newshub the smartest thing to do is repay loans at the same rate, or even faster.

"You can really save yourself some money over the term of a loan."

A property data company doubts a lower OCR will cause the housing market to roar back to life, but it says  tighter lending by banks' criteria will be the biggest restraint.

Real estate concept. House on calculator. Mortgage. 3d
Photo credit: File

What banks are offering

  • Kiwibank says it is passing on the full 0.5 percent OCR rate cut to its customers with variable home loan rates -  which will see it having the lowest variable rate in the market.
  • ANZ has lowered its interest rates on its Floating and Flexible home loans by 0.5 percent, from 5.69 percent to 5.19 percent.
  • Westpac has reduced its Choices Floating rate to 5.34 percent pa and the revolving Choices Everyday rate to 5.44 percent pa.
  • ASB has reduced its variable home loan rate by 0.5 percent from 5.7 percent pa to 5.2 percent pa. It has also lowered its two-year fixed home loan rate by 4bps to 3.75 percent pa.
  • Bank of New Zealand (BNZ) is cutting both its floating and fixed home loan rates.