ASB ramps up price war with 2.69% mortgage

The big four bank has made significant cuts to its home loan card that come into effect on Saturday. 

ASB's two year rate is reduced by 30 basis points to 2.69%, becoming the cheapest rate in the market by 10 basis points. 

ASB's executive general manager Craig Sims said the new rate showed the bank was "doing our part to support our customers on their home ownership journey".

Sims added: "We hope this will help them manage their home loans, or enable others to be in a position to get into their first home. This has been an incredibly challenging period for a lot of our customers, and we’re doing everything we can to support them and make things a little bit easier. We’re confident these new rates will help with that."

Aside from the record low two-year rate, ASB has made huge cuts to the rest of its card.

Its six month special rate falls by 34 basis points to 3.55%, three year special falls by 34 basis points to 3.35%. Four and five year special rates are also reduced by 34 basis points to 3.45% and 3.55%.

ASB said the new rates bolstered support options offered to customers in recent months, including mortgage deferrals. 

Sims said lower rates would help customers deal with the economic impact of Covid-19. 

"We’re conscious that the impacts of COVID-19 will still be felt for a while to come, and we will continue to help our customers through that. Our new special two-year low rate is part of this,” says Sims.

ASB's huge cuts will ramp up pressure on the rest of the big four to cut home loan rates. Westpac has announced a new one and two year rate of 2.79%, set to come into effect on Monday. 

Glen McLeod of Edge Mortgage's said the ASB cuts were "a great end to the week", with the banks "finally starting to provide the benefits to the customers".

McLeod said clients would be left with a decision on whether to seek short or long term options.

"Will we continue to see reductions post 24 June OCR? Or is this the banks changing based on the pressure from the Reserve Bank? Is now the time to lock in for the longer term or take a shorter term rate to see if you can get further reductions in 2021?"

The Reserve Bank is likely to welcome the increase in mortgage rate cuts in recent weeks. RBNZ deputy governor Geoff Bascand called on banks to pass on more cuts to borrowers this week, as wholesale rates fall due to central bank bond buying and the expectation of a lower official cash rate.