Photo: Supplied/ Dan Bailey
The Reserve Bank might have cut the official cash rate by 25 basis points this week - but have borrowers got the benefit?
After the reduction was announced on Wednesday, there were a flurry of rate changes.
Westpac, ANZ and Kiwibank cut their variable home loan rates by 20 basis points. BNZ cut by 15.
Westpac also dropped its fixed home loan rates. The one-year and 18-month rates dropped by four basis points, to 4.75 percent.
The two-year rate dropped by 20bps, to the same rate, the three-year rate by 4 basis points to 4.95 percent and the four-year rate by 30bps to 5.09 percent.
ANZ, Kiwibank and Westpac all cut their serious saver interest rates by 25 basis points.
Infometrics chief forecaster Gareth Kiernan said the decision not to pass on the full cut to floating rates seemed odd, given the savings rate cuts.
"Having said that, the margin between the OCR and floating rates had been unusually low since early 2023, and it's still slightly lower now than what prevailed throughout most of the first half of the 2010s - and considerably below the second half of last decade, so I'm not sure that people can complain too much."
He earlier calculated that compared to the peak, by July, when the official cash rate was down by 225bps, one-year rates were down 243bp, two-year rates 207bp and three year rates 172bp.
ANZ said it considered a range of factors when it was reviewing interest rates, including the OCR, changes in wholesale rates and the needs of borrowers and savers.
"Because banks have multiple lending sources, interest rate changes don't always fully reflect changes in the official cash rate.
"Through the recent interest cycle, following changes to the OCR, there are times when we've not passed on changes to the OCR in full. For home loans, ANZ has passed on 94 percent of the OCR decreases compared to 80 percent of the increases.
"Between October 2021 and May 2023, the OCR increased by 525bps. In response, ANZ increased floating home loan rates by 420bps and Serious Saver by 430bps."
ANZ said after seven of 12 OCR increases, the full increase was not passed on to lending rates.
"This meant borrowers bore less of the impact of rapidly rising rates."
The spokesperson said that since August last year, over the period the OCR had fallen by 250bps from its peak of 5.5 percent, ANZ NZ had reduced home loan floating rates by 235bps.
"Fixed rates have fallen even further, since we started cutting rates in March last year our 1-year home loan special rate has fallen by 260."
Kiwibank said the key was that it had consistently had the lowest variable rates.
David Cunningham, chief executive at Squirrel, said floating rates were a "cash cow" for banks.
"How is it that a one-year fixed mortgage rate of 4.8 percent is possible with a wholesale one-year rate of around 2.8 percent - a 2 percent margin, yet the floating mortgage rate is around 6.3 percent, with a wholesale three-month rate of around 3 percent, a 3.3 percent margin.
"Banks are arguably overcharging customers by 65 percent. The lone exception is Co-op Bank with a 5.7 percent floating rate. Still elevated but not as bad."
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