Normally the sinking feeling isn't a good one, but this week's been different. Floating rates have been sinking bringing down the cost of borrowing for many people. During the week Westpac and BNZ have both made significant cuts to their floating rates with cuts of up to 80 basis points in one case. With cuts of this magnitude lenders could well be admitting that their margins on floating rate business have been very fat and rewarding.
The other story is that instead of directly competing in standard terms lenders are taking differentiated strategies. For instance Westpac has chosen to offer its best rate on its Everyday Choices revolving credit loan product, while BNZ has opted to use its TotalMoney offset account as its "hero" product.
Details of Westpac's cuts are here, and BNZ's here.
To see how far these rates have fallen and how the lenders have changed competitive positions check out this table.
In other news we have two themes from economists this week; one is that predicting interest rates in the medium term is a "highly uncertain exercise" and the other is that the housing market isn't likely to take off big time, although it appears to be improving.
If you want to know how ASB is getting on in this market read our report here.
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