Kiwibank jumps the gun and cuts its floating rate before the Reserve Bank OCR decision on Wednesday, confident its 50 basis points cut will be matched by the central bank

Kiwibank isn't waiting for the outcome of Wednesday afternoon's Reserve Bank Official Cash Rate (OCR) review, signaling it'll cut its floating rates by 50 basis points no matter what the Reserve Bank decides.

The cut's effective from Monday, October 14 for new customers, and October 29 for existing customers. Many economists, including Kiwibank's, are picking the Reserve Bank will cut the OCR by 50 basis points to 4.75% on Wednesday afternoon.

The state-owned bank also revealed it has 38,000 customers on a home loan floating rate who will get the reduction. (Update: Kiwibank has subsequently flagged that the 38,000 number includes both home and business lending customers.)

At the same time, the New Zealand Banking Association revealed across all banks, 20.1% of all home loans are on a floating rate, which equates to 277,400 floating rate mortgages. Kiwibank therefore has a 13.7% share of these variable rate home loans - which is about double its overall home loan market share.

Interestingly, Kiwibank wasn't the first to move. There  have been virtually no floating rate changes since the last set following the OCR cut on August 14, except the ICBC one that happened on Friday, October 4. ICBC went down the middle with a 36 basis points cut, making it the lowest floating rate of any bank. And that change undercuts Kiwibank by 26 basis points.

But Kiwibank is a main bank, and its move maintains and enhances its floating rate competitiveness. Kiwibank started with a 14 basis points advantage, and now has a temporary 64 basis points advantage. It'll be interesting to see where this settles after Wednesday's Reserve Bank decision at 2pm.

To be fair, most home loans are on a fixed rate basis. The NZBA notes 59.7% of all home loan arrangements are solely fixed, 20.1% are floating only, and the balance are a mix of the two.