Westpac cuts 1% off business overdraft and base rates (Update 2)

Westpac announced it would cut 1% off its business overdraft and base business lending rates following cuts in its mortgage rates on Thursday. The Reserve Bank of New Zealand cut the Official Cash Rate by 150 basis points on Thursday to 3.5%, with Governor Alan Bollard urging banks to pass on interest rate cuts. Westpac said the new base rate categories would range from 8.2% to 13.95%, depending on a number factors surrounding borowers' circumstances. Westpac Media Relations Manager Craig Dowling told interest.co.nz the bank would not be shifting people between categories so that they would end up missing out on the 100 basis point (bp) cut in the rates. Dowling said that the base rates had fallen 175 bps over the last year, including this most recent 100 bp cut and a 75 bp cut in December. In contrast, the Reserve Bank cut the OCR by 475 basis points since July 2008. Here is the announcement from Westpac.

Westpac New Zealand has announced a 1% cut to its business overdraft and base business lending rates, in a move that will provide some relief to businesses as well as the rural sector. The move follows the announcement yesterday of across the board cuts to the bank's home mortgage interest rates. Westpac's Acting Chief Executive Bruce McLachlan said today that many business customers have benefitted significantly and directly already through borrowing tied to bank bill and swap rates. The 90-day rate has fallen from a high of around 9% to where we are today at under 4%. That means some businesses will have experienced close to a 5% reduction in their cost of borrowing in the past six months. "We do know, however, that many small and medium-sized businesses also utilise significant overdraft facilities for their day to day cash flow so a reduction in business overdrafts rates will also be very welcome. "The overdraft and base interest rate cuts will apply to business within the next two weeks, demonstrating further that Westpac recognises the role the bank has to play in helping our customers as well as the economy," Mr McLachlan said. "We want to assure our customers, many of whom are businesses, that we are doing, and will continue to do, what we can to support them in the face of a difficult global and local environment. For the bank, that includes managing higher levels of risk in relation to our lending as well as higher relative funding costs as a result of worsening international money market conditions. "Importantly, businesses should feel reassured that Westpac remains open for new lending, confident it can manage that lending prudently and in a way that can help support the economy back to growth," Mr McLachlan said.