The new Reserve Bank Governor says banks hiking their mortgage rates so soon after the central bank’s cut the official cash rate “risks putting a dampener on New Zealand's economy”.
Dr Anna Breman spoke exclusively to 1News in her first one-on-one interview since she took the reins of the RBNZ.
The Swedish economist was at pains to point out her focus is squarely on inflation, which is expected to drop from the current 3% level, to closer to 2% heading into the middle of next year.
“I think it's also my job now to better explain the role of the Reserve Bank in the New Zealand economy and really explain why it's so important that we focus on these core mandates that we have,” she said.
Watch: RBNZ boss says mortgage rate hikes 'risk dampening NZ economy' on TVNZ+
“I will be relentless in reminding everyone why this is important and why it's so hard to get healthy growth in a strong labour market unless you have low and stable inflation.”
Both Westpac and ANZ have hiked respective three-to-five-year mortgage rates by 0.3 percentage points – that’s despite the Reserve Bank cutting the official cash rate to 2.25% late last month.
Breman was not part of that decision, as she took over as Governor on December 1.
But the bank’s move prompted Finance Minister Nicola Willis to tell New Zealanders that, when it comes to their mortgage: “Shop around”.
“Don't just look at the headline rates. Go and hold your bank's feet to the fire. See if another bank will give you a better rate.”
Speaking to 1News, Breman wasn’t as explicit when asked if she shared Willis’ message.
“I think it's reasonable and fair to say that households should be considering how they want to act in a case where the banks are hiking their mortgage rates,” she said.
“I think that it's one of the things that I've noticed coming new to this country is that there's quite a large difference between the OCR and the mortgage rate that households pay.”
But she would not comment specifically on the question of Westpac hiking some of its mortgage rates: “You have to ask the banks about that.”
In a statement, Westpac said fixed rates are mainly driven by movements in wholesale interest rates rather than the OCR.
“While the OCR has fallen, wholesale rates have lifted materially, by more than 0.4% on longer terms since the day before the OCR announcement.”
Westpac also reduced its 6-month rate by 0.2 percentage points to 4.69%.
Meanwhile, New Zealand Financial Services Group and Loan Market chief executive Bruce Patten is laying the blame for Westpac increasing some of its interest rates at the Reserve Bank’s feet.
He cited the commentary from former Acting Reserve Bank Governor Christian Hawkesby, in the press conference after he cut the cash rate.
“We have published a central projection for the Official Cash Rate that would be consistent with the Official Cash Rate being on hold through the course of 2026,” Hawkesby said at the time.
Patten said, of the RBNZ: “I just think they really didn't expect the markets to react the way they did.”
He said the Reserve Bank’s commentary gave the impression that November’s 0.25% cut was the final one in its easing cycle.
“I think they just made a mistake in their commentary. What they should have said is, ‘hey, there could be some more easing still to come. We don't know yet. We're just waiting and seeing’. Whereas they sort of pretty much said, ‘hey, that's it. It's all over.’”
He expected other banks to follow Westpac’s lead and begin to cut rates over the Christmas break.
That’s a prospect clearly on Breman’s mind.
“My perspective is that if we see a lot of tightening, we have to be very vigilant because we don't want that tightening to reduce the growth that we're starting to see happening right now.
“The purpose of cutting the OCR is to provide support for the economy, and that's what we want to see happening.
“Again, markets react and I'm not going to comment whether it's right or wrong, but I will say that we are looking for this to translate into healthy, stronger growth in the stronger labour market while keeping that laser focus on inflation to ensure that inflation is low and stable.”
She told 1News a cut to the OCR is expected to help stimulate the economy.
“If the banks hike mortgages and that reduces growth, we have to take that into consideration.”
Asked what her consideration was, she said: “My consideration is that it's a risk that it dampens the growth that we're starting to see."
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