The Reserve Bank has this mornng cut the Official Cash Rate by 0.25 per cent to a new record low of 2 per cent.

Global growth is below trend despite being supported by unprecedented levels of monetary stimulus, the bank said in a statement. Looking ahead, the bank said more cuts may be required.  "Monetary policy will continue to be accommodative," it said.  "Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range,". The central bank aims to get inflation within an annual 1 to 3 per cent range.

Banks are not expected to pass on the full official cash rate to home-buyers because of their rising funding costs.

Reserve Bank governor Graeme Wheeler says he would like to see most of its OCR cut passed on by the banks to their customers but believes it is up to individual banks to make that call.

"It is a very competitive market. We don't want to end up directing banks on pricing." Wheeler said bank's net interest margins were trending downwards and were in line with international rates.

Fixed term mortgage rates - where most home-owners had their mortgages - had also fallen.

ANZ was the first bank to cut floating lending rates in response but home buyers will get just a tiny fraction of the benefit.

ANZ cut its home loan rates but has also increased some of its deposit rates. Westpac joined in, reducing its floating rate by 10 basis points to 5.65 per cent. It too has introduced a new deposit rate - of 3.5per cent for a six month term - this is a hike of 0.5 per cent.

Full story: NZHerald