Kiwibank reduced its one-year fixed rate to 6.49% and its floating rate to 7.45%. SBS Bank dropped its floating rate 1.95% to 7.2%, a four-year low.
SBS chief executive Ross Smith said the newly-registered bank could pass on the full benefits of the OCR reduction - and more - because it was not affected by the increased cost of borrowing offshore.
"In real terms, it means that householders on a floating rate with a 30-year, $300,000 loan will see about $315 carved off their monthly mortgage payment. Passing on the full reduction could potentially be a lifeline to some homeowners," he said.
About 80% of New Zealanders with mortgages have them on fixed rates, meaning the immediate benefits of the rate cuts will only be felt by the 20% with floating mortgage rates.
However, ASB economist Jane Turner said in an interview there had been a trend in the past six months for homeowners to fix mortgages for shorter periods.
She estimated that 50% of homeowners with fixed mortgages would benefit in the next year from the lower rates being offered by banks.
The ASB was predicting a further 1.5% drop in the OCR next year, taking it to 3.5%. If that was the case, homeowners rolling off their fixed terms next year would receive a greater benefit, Ms Turner said.
The effective mortgage rate, calculated by the Reserve Bank, still remained high and would remain a focus of the central bank.
Massey University centre for banking studies director David Tripe said the cut would reduce homeowners' mortgage payments and perhaps boost business confidence in the short term, but those effects "will be not necessarily huge".
Wider economic anxieties would probably occupy consumers' minds, not least the value of the properties on which they held mortgages.
Yesterday's 1.5% cut was the biggest since the OCR was introduced in 1999, and follows the previous record cut - one percentage point - in October.
The OCR has not been this low since December 2003.
- Additional reporting: The New Zealand Herald
