Westpac, ANZ, ASB and Kiwibank have announced interest rates cuts. Photo: RNZ
Are borrowers missing out if banks don't pass on the full 25 basis points of the official cash rate cut?
The Reserve Bank cut the OCR on Wednesday by 25 basis points.
Banks responded quickly, but some borrowers complained that they did not give them the full benefit.
Westpac cut its floating rates by 15 basis points, its six-month fixed rate by 10, its one- and two-year and 18-month rates by four and its three-year rate by 24 basis points.
ANZ cut its floating rate by 20 basis points, and had trimmed fixed-term rates earlier in the day.
Kiwibank cut its floating rates by 15 basis points, and ASB cut by 20.
Kelvin Davidson, chief property economist at Corelogic, said it was not surprising that the full 25 had not been handed to borrowers.
"If you look over a bigger period, the pass-through of OCR to longer-term rates is never one-for-one anyway because longer-term rates are determined by so many other things. They're much more about global wholesale rates and financial markets rather than the OCR so you never really expect a direct pass-through to longer-term rates."
He said even though the OCR was more closely tied to floating rates, they could have moved ahead of time, too.
"The OCR is now down 2.25 percent from the peak and most mortgage rates have fallen by at least that much."
Reserve Bank data suggests the peak for floating rates this cycle was about 8.6 percent. ASB is now offering a variable rate of 6.44 percent.
"When you look at the longer-term picture, the pass-through is pretty good," Davidson said. "The Reserve Bank has been signalling for a while that it may get to around 3 percent for the OCR and the banks have acted ahead of that."
He said it was not clear how much of future OCR cuts would be passed on.
"To some extent none might be. But a bout of competition might re-emerge. What we're seeing in the data is the punter on the street is thinking that, too. We've started to see the share of new lending on longer-term fixed rates rising."
Simplicity chief economist Shamubeel Eaqub said the 90-day bank bill rate could have increased a little after the Reserve Bank meeting, on the news that one member of the monetary policy committee had voted against a cut.
But he said the difference between what banks charged borrowers and what they paid for funding, such as via the 90-day rate, was at a high level.
"It's not that they're not passing on the reductions in the OCR, they are - some of it has been passed on ahead of time because the market has been anticipating those cuts.
"The bigger question is not whether or not the wholesale cuts are being passed through, it's are the banks making a killing between the cost of wholesale funds and what they charge you? That's more of a structural story."
On Wednesday, ANZ said it had passed on 96 percent of the OCR decreases announced so far in the recent interest rate cycle, compared to 80 percent of the increases.
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