Floating rates that don't sink
Bollard cut his official cash rate (OCR) from 8.00% to 7.50% in September, to 6.50% in late October and to 5% earlier this month. On Wednesday, he told a Wellington business audience banks shouldn’t be looking to maintain high profit margins, noting they have failed to cut their short- term lending rates by as much has he had cut the OCR.
Perpetual Trust, a subsidiary of Pyne Gould Corporation which plans to turn the trustee company and its finance company subsidiary Marac into a bank, still has its floating mortgage rate set at 10.95%, nearly 600 basis points above the OCR. The rule of thumb in more normal times is for floating rates to be about 225 basis points above the OCR.
By contrast, the major banks’ floating rates range from 7.95% to 8.20% and the lowest rate in the market, 7.20% is offered by new bank SBS.
Charlie Goodwin, head of investments and marketing at Perpetual, says unlike the trading banks, his company’s mortgage funds come from its managed fund.
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