ASB Bank dropped its floating rate to 6.4% while at the same time increasing its three, four and five-year fixed rates to 6.15%, 6.55% and 6.75% respectively.
Other major retail banks kept their fixed rates unchanged while dropping their floating rate to 6.45%. The competitive two-year fixed rate remained at 5.95% yesterday with most banks keeping their five-year rate at 6.5%.
BNZ chief economist Tony Alexander said the Reserve Bank met his expectations with its 0.5% cut to the official cash rate to take it to 3%.
"We think there will be further cuts which eventually see the rate bottom out at 2% in the middle of the year."
However, because the rate cut was not quite as big as the 0.75% expected in parts of the market, wholesale interest rates crept up on Thursday with the 90-day bank bill (a key indicator of floating mortgage rates) ending at 3.4% from 3.16% last week.
The two-year swap rate ended near 3.31% from 3.34% and the five-year swap rate finished around 4.22% from 4.26% last week.
Mr Alexander believed the Reserve Bank's growth forecasts for late this year were too optimistic and the cash rate would end at 2% rather than the 2.5% implied in the monetary policy statement.
"We see some scope for further declines in interest rates across the curve although acting against further declines will be the risk that hopes for world growth pick up. When that happens, the movement of money from fixed interest towards riskier assets and anticipation of central banks raising cash rates - perhaps from late 2010 - will place upward pressure on our swap rates."
It was impossible to make a reasonable pick to when the bumping up of rates would occur but many corporate borrowers were no longer willing to take the risk they would get caught by the sell-off and were fixing now, he said.
"I still believe market competition is going to produce a five-year fixed rate below 6%."
Long-term swap rates had crept up in recent weeks because business borrowers, in particular, were opting for the certainty of a rate far lower then they had been anticipating a few months ago rather than punting on another 0.5% reduction, Mr Alexander said.
"If I was a nervous sort of home owner, or simply wanted to focus my attention on other things, I would either fix for five years at about 6.5% or take a three-year rate just under 6%. But for myself, I would still hang on a bit longer for a sub-6% five-year rate - personal preference."
Mr Alexander warned of continuing problems within the real estate industry, particularly of young, first-home buyers remaining priced out of the market by banks requiring a 20% deposit.
"Don't ignore this important problem with the real estate sector in New Zealand. It means we remain of the view that issues with affordability will return in spades later this year."
The issue would be made more dire by the forecast surge in net immigration and the steep fall in new dwelling construction under way. So far, there had not been a positive price response because there was concern on the part of both buyers and sellers about forecast higher unemployment.
Also, the evidence from the latest BNZ confidence survey showed that real estate turnover was being partly boosted by vendors becoming more realistic in their price expectations rather than buyers paying more.
