Some banks are quicker to pass on official cash rate movements to borrowers and savers than others, new data from the Financial Markets Authority shows.
By Susan Edmunds of RNZ
It said it had requested information from eight financial institutions, providing 98% of housing loans in New Zealand, about how their products had moved.
The intention was to improve transparency about the pace at which banks passed through OCR movements to borrowers and savers.
The data shows that while the OCR was falling last year, Kiwibank passed on 100% of the cuts to on-call savings accounts, and quite quickly. TSB was close behind, passing through about 95%. ANZ passed on 30%, Westpac 50% and The Co-Operative Bank 58%. ASB passed on 62%.
When the OCR lifted in July, Kiwibank and TSB passed on the whole increase, SBS passed 20 basis points of the 25bp lift. ASB, The-Cooperative Bank and Westpac passed on 15.
On the mortgage side, when rates were cut last year, most banks passed on 60% to 80% of the reduction in floating rates. The Co-Operative Bank passed through 96%. ANZ was at about 80% and Kiwibank 72%.
When the rate rose in July, The Co-Operative bank passed through 35 basis points of the 25 basis point increase and the rest of the banks passed on the full increase.
Infometrics chief forecaster Gareth Kiernan said earlier research had showed a pass-through rate of about 80% because the OCR was only part of a bank's funding mix.
He said some people might feel borrowers' rate rose faster than saving rates fell but that could be an issue of perception. "They don't notice when it's in their favour....casting some light on it and having more information, you certainly can't criticise that and it could well become useful over time."
He said it could have an impact if the data started to show one or two banks standing out as particularly slow to pass on movements, or less generous in a way that seemed designed to boost margins.
"You don't want to get that reputation as being the bank that's ripping everybody off. I think there's still issues in terms of people's willingness or ability to change banks and how easy that it.
"But go back to late last year when there was some quite big cashback offers being done by the banks and a hell of a lot of switching that went on then. So people are sensitive to some of the stuff. If they want to be maintaining their market shares and protecting those over time, I would expect, generally, banks to fall in line with what others are doing."
Simplicity economist Shamubeel Eaqub said the data showed banks would move rates for new customers more quickly than existing ones.
He said there was nuance to consider but it was positive that the FMA was monitoring rates. "I hope they will keep on expanding it because the OCR stuff is only the beginning. The real game is in the fixed mortgage space. The spread over swaps are exceptionally high in New Zealand compared to Australia, for example.
"I very much refuse to believe that somehow lending a fixed mortgage in New Zealand is more expensive than it is in Australia... I think transparency and public pressure are really good things to have. And if we see evidence that banks are becoming slower to pass on savings and are asymmetric in their treatment of borrowers versus savers, then there's a case to be answered. But you can't do that unless there is transparency and data to tell you there is an issue."
New Zealand Banking Association chief executive Roger Beaumont said the OCR was one factor in the mix for bank pricing.
"Other factors that a bank may consider include the cost of funding they need from overseas, and also the cost of domestic funding sources such as their customers' term deposits. If interest rates for loans go up, the flip side is that customers with terms deposits generally benefit from higher interest rate returns on their investments.
"When the OCR does change and affects a bank's pricing, the bank cannot usually pass on any changes to existing customers immediately because, as responsible lenders, they need to comply with information disclosure requirements which means they need to give customers notice of any changes. That applies to both pricing increases and decreases."
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