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Don't expect rates to fall on back of OCR cut

Although the Reserve Bank cut the official cash rate to a historical low of 1.75% none of the banks have passed on any of this decrease to customers.

Thursday, November 10th 2016, 1:43PM 1 Comment

While the banks have been silent, BNZ did put out a statement confirming it would not cut its rates. Westpac followed late on Thursday.

“We are not making any changes to interest rates today," BNZ acting director of retail and marketing David Bullock said.

"It’s a good time to remind people that interest rates aren’t directly or solely linked to the OCR. Banks get their ability to lend from a few sources, most of which are getting more expensive and putting pressure on margins.

"One source is local deposits, and at the moment there are more people wanting home loans than there are people saving. So to encourage and attract more deposits (people’s savings and terms deposits) we need to pay a sharper return to savers. And we still need overseas funds to fill the gap – and the cost of these remains volatile. 

"All those factors considered, it’s still important to remember that today’s interest rates for home loans are still some of the sharpest in decades and still a good time for people with home loans to look at ways to pay off their loans faster,” he said in a statement.

Westpac took a similar line saying: "There will be no change to Westpac’s mortgage rates following the Reserve Banks New Zealand’s cut in the Official Cash Rate today. On-going rises in the cost of offshore funding provide no opportunity to lower home loan rates at this time."

General Manager Consumer Bank and Wealth, Simon Power, said the consistent low flow of local deposits was forcing banks to look offshore for funds.

“The OCR is just one factor in assessing interest rates. Its importance is diminished when banks need to use offshore funds to cover the gap left by a lack of local deposits,” he said.

“In this situation and in a period of global uncertainty, a number of factors become more influential than the OCR. These include the increased cost and lack of supply in the local deposit market, exchange rate risk and the increased capital requirements for investors.”

“With historic low interest rates NZ home owners are taking the opportunity to pay down mortgages faster and reduce debt levels. Many home loan customers have done that and are more than three months ahead on repayments. This deleveraging is prudent and a positive step for the economy and New Zealanders.”

Tags: BNZ OCR Westpac

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Comments from our readers

On 14 November 2016 at 9:35 am DT said:
'Ongoing rises in the cost of off-shore funding' providing the banks with 'no opportunity' to lower interest rates- perhaps the average mug borrower like myself would find this argument a little more acceptable if we knew what these rising offshore costs were? Don't tell me- this is commercially sensitive information which we can't release to idiot borrowers!
So the banks are going to raise interest on deposits to encourage more people to invest so there is more local money to lend? I have yet to see one example of this since the OCR was lowered last week
How stupid do banks think the average borrower is? Very stupid, if they expect us to believe the regular bleats about not being able to lower interest rates

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.45 4.49 4.69
ANZ Special - 3.95 3.99 4.19
ASB Bank 5.80 4.49 4.49 4.45
ASB Bank Special - 4.09 3.99 3.95
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.05 3.99 3.95
BNZ - Std, FlyBuys 5.90 4.69 4.59 4.79
BNZ - TotalMoney 5.90 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.15 5.20 5.25 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.70 4.85 -
Housing NZ Corp 5.80 4.69 4.79 4.79
HSBC Premier 5.89 3.99 3.99 4.39
HSBC Premier LVR > 80% - - - -
HSBC Special - 3.69 3.69 3.95
Lender Flt 1yr 2yr 3yr
ICBC 5.79 3.99 3.99 4.49
Kiwibank 5.80 4.80 4.94 4.84
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.05 3.99 4.09
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.46 4.69
RESIMAC Special - - - -
SBS Bank 5.89 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 4.05 3.99 4.49
Sovereign 5.90 4.49 4.49 4.45
Sovereign Special - 4.09 3.99 3.95
The Co-operative Bank - Owner Occ 5.75 3.99 4.15 4.35
The Co-operative Bank - Standard 5.75 4.49 4.65 4.85
TSB Bank 5.80 4.55 4.49 4.65
TSB Special - 4.05 3.99 4.15
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.69 4.79 5.19
Westpac - Offset 5.95 - - -
Westpac Special - 4.05 3.99 3.95
Median 5.89 4.49 4.49 4.47

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