Two of New Zealand’s largest banks quickly decreased their mortgage test rates following the Reserve Bank’s latest Official Cash Rate (OCR) cut.
The RBNZ cut the OCR by 25 basis points from 3.75% to 3.50% on Wednesday, a widely expected move.
While all of NZ’s bigger banks have been quick to respond to the OCR cut by trimming floating interest rates, ASB and Westpac are the only two to cut their mortgage test rates post the OCR announcement, so far.
Banks use mortgage serviceability test rates to gauge the repayment capacity of would-be home loan borrowers’ if interest rates rise. A lower test rate increases borrowers' borrowing capacity.
ASB and Westpac have followed the lead of the country’s largest home lender ANZ NZ which cut its mortgage test rate by 15 basis points last Wednesday, a week before the Reserve Bank trimmed the OCR.
Westpac said it will be lowering its mortgage serviceability rate from 7.25% to 7.00% on Monday 14th April.
ASB told interest.co.nz on Wednesday its servicing test rate for home loans will be dropping by 20 basis points from 7.30% to 7.10%, effective from Monday 14th April.
ANZ NZ last week cut its home loan affordability test rate to 7.10% from 7.25% effective from April 2nd.
Following the Reserve Bank’s 25 basis-point cut on Wednesday, the ANZ spokesperson confirmed there had been no further changes to ANZ’s test rate and it is still 7.10%.
BNZ still has a mortgage test rate of 7.5%.
“This was last updated in November [2024]. We regularly review our test rate in line with market conditions and our responsible lending obligations,” a BNZ spokesperson said.
A Kiwibank spokesperson said the bank would be reviewing its test rate – which is sitting at 7% – in the coming days.
Kiwibank currently has the lowest mortgage serviceability test rate across the big five banks at 7%, with ASB and Westpac joining the 7% club on April the 14th. ANZ is next in line with a 7.10% test rate and then BNZ with a mortgage test rate of currently 7.5%.
A Test Rate table resource is here.
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