The downgrading of the sovereign debt rating in the United States has removed the need for the New Zealand Reserve Bank to lift its official cash rate to 3% in September.
The market had yesterday completely priced out any rise in the OCR and there is only a slim chance the central bank will lift its rate in December.
That will give some breathing space to homeowners with mortgages and people with hire purchase contracts.
The 90-day bill rate, usually a key indicator for mortgage rates, had fallen from 2.97% on August 3 to 2.74% last night.
Commonwealth Bank of Australia subsidiary ASB responded quickly to the pricing by reducing its fixed mortgage rates a week after it raised them.
The cuts include a 0.25% reduction in the one-year rate to 5.9% a year; a 0.30% reduction in the 18-month rate to 6.10%; and a 0.35% reduction in the two-year fixed housing rate to 6.30%.
The rates were effective from today.
The fall in the value of the New Zealand dollar will also have contributed to the lower market expectations of an OCR rise.
However, that might not be the case in the United States which faces higher borrowing costs because of the Standard and Poor's downgrading on the Government's debt credit rating to AA-plus, the same as New Zealand.
The downgrade broadly reflected the S&P view that the effectiveness, stability and predictability of American policy making and political institutions had weakened more than envisaged.
Republicans and Democrats fought for weeks over the wording of the agreement which, in the end, saw the Republicans win their spending cuts and the Democrats losing in their plan to lift tax rates.
S&P said it had changed its views on the difficulties in bridging the gulf between the political parties over fiscal policy.
"That makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilises the Government's debt dynamics anytime soon," S&P said.
Reaction to the downgrade was harsh in the US with Senator Bernie Sanders (Independent) venting on Twitter.
"Where was S&P four years ago when they helped cause recession by providing AAA ratings to sub-prime mortgage schemes," he tweeted.
A White House economic adviser slammed S&P for having stuck with its decision to downgrade the US credit rating despite having made a $US2 trillion ($NZ2.4 trillion) mistake in its fiscal projections.
"The magnitude of their error combined with their willingness to simply change on the spot their lead rationale in the press release once the error was pointed out was breathtaking," Gene Sperling said in a statement.
"It smacked of an institution starting with a conclusion and shaping any arguments to fit it," he said.
