Photo: RNZ
The Co-Operative Bank says it is the only bank to have passed on the full official cash rate cut to floating mortgages - but other banks say that isn't the full story.
Since the Reserve Bank began reductions to the OCR 15 months ago, it has dropped from 5.5 percent to 2.5 percent.
Another cut is expected this month.
In response, the Co-operative Bank said it had reduced its floating home loan rate by 3.1 percentage points - or just slightly more than the drop in the OCR.
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It said other banks had dropped their floating rates by between 2.55 and 2.7.
Reserve Bank data shows that advertised special fixed home loan rates have dropped over that same period from about 7 percent on average for six-month terms, 6.9 percent for one-year and 6.5 percent for two years, to 4.8 percent, 4.5 percent and 4.3 percent on average respectively.
Mark Wilkshire, chief executive of The Co-operative Bank, said, "With the bank's floating volumes almost doubling in the last year, we're pleased to offer both great value and flexibility through our market leading rate.
"We estimate that New Zealanders could be paying more than $100 million per annum extra due to the amount of floating rate cuts held back by the big four Australian banks," he said.
"With another OCR review due at the end of November, it will be interesting to see how other banks respond in what remains a delicately poised economic recovery," Wilkshire said.
He said people often did not pay a lot of attention to floating rates but the amount being paid in interest on them would add up.
"There's $47 billion sitting out there in the banks on floating rates so it does fly a bit under the radar. We thought it was worth taking stock as we head towards the bottom of the cycle.
"How much is being passed on out of that across the whole sector? And it certainly adds up when you look at all the amount that customers have sitting on floating balances."
The Co-Operative Bank says it is the only bank to have passed on the full official cash rate cut to floating mortgages - but other banks say that isn't the full story. Photo: Supplied/Co-operative Bank
But ANZ said people looking at rate changes needed to consider the full interest rate cycle.
"Through the recent interest rate cycle, following changes to the OCR (both increases and decreases), there are times when we've not passed on changes to the OCR in full.
"Between October 2021 and May 2023, the OCR increased by 5.25 percent. In response, ANZ increased floating home loan rates by only 4.2 percent. During this time the RBNZ increased the OCR 12 times. Following seven of those announcements ANZ did not pass on the full OCR increase. For example, following the 50-basis point OCR increase in February 2023, ANZ made no change to interest rates.
"Since August 2024 the RBNZ has cut the OCR eight times, from 5.5 percent to 2.5 percent. In response, ANZ has reduced home loan floating rates by 2.75 percent.
"In summary, when the OCR was increasing, ANZ increased home loan floating rates by 105-basis points less than the total OCR hikes. In the more recent OCR easing cycle, we have cut our floating home loan rate by 25-basis points less than the total of OCR cuts to date. That balance needs to be considered."
It said banks had multiple lending sources and needed to consider a range of factors when deciding to make changes to the interest rates available for lending and deposits.
Reserve Bank changes would influence wholesale market interest rates but were not the only driver.
Westpac said it was working hard to provide value across all lending and savings rates.
"Around 87 percent of our home loan customers are on a fixed home loan rate, where we offer sub-5 percent special rates on all fixed terms from six months to five years - one of the only main banks to do so. Supporting this, an analysis last week by Opes Partners rated Westpac as consistently offering the lowest fixed rates of any [main] bank over the last two years.
"While we've cut our variable home loan rates by 2.55 percent a year since the OCR started falling, we've cut some business lending rates by 3.05 percent - more than the OCR has fallen - to support them to grow. To support our savings customers, we've passed on just 1.75 percent of OCR cuts on our 32-day Notice Saver product."
Wilkshire said most people were still taking short-terms when they came to refix.
"The majority choice is still going for those one-year rates because they are the lowest rates. But that's where I think a good conversation with someone who offers good service will actually look at your whole needs and see what suits you and take those circumstances into account because you do want to look at what you're paying on floating, what you're paying on fixed and should you be fixing for the longer term as we head towards the bottom of that cycle.
"I think rather just defaulting to the lowest rate at the moment, it is probably just worth having a broader look at the full range of your options."
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