Data exposes wide gaps in pass-through speed
New data from the Financial Markets Authority has revealed significant differences in how quickly major banks pass on official cash rate movements to both borrowers and savers.
The regulator requested information from eight financial institutions, together representing 98% of housing loans in New Zealand, as part of an effort to improve transparency around pricing behaviour, RNZ reported.
The Reserve Bank last moved the OCR on 8 July, lifting it 25 basis points to 2.5%, with its next scheduled decision — a Monetary Policy Statement — due on 2 September.
The figures show stark contrasts on the savings side. While the OCR was falling last year, Kiwibank passed on 100% of the cuts to on-call savings accounts, and quickly, with TSB Bank close behind at about 95%. ANZ, by contrast, passed on only 30%, Westpac 50%, The Co-operative Bank 58% and ASB 62%. When the OCR lifted in July, Kiwibank and TSB again passed on the full increase, while SBS Bank passed on 20 of the 25 basis points, and ASB, The Co-operative Bank and Westpac each passed on 15 basis points.
Mortgage rates show a similar story of uneven pass-through
On the lending side, when rates were cut last year, most banks passed through 60% to 80% of the reduction in floating rates, with The Co-operative Bank leading at 96%, ANZ at about 80% and Kiwibank at 72%. When the OCR rose in July, the pattern flipped for at least one bank: The Co-operative Bank passed through only 35 basis points of July's 25-basis-point rise, while every other bank passed on the full increase.
Infometrics chief forecaster Gareth Kiernan said the disclosure was a welcome step, even if pass-through rates naturally vary given the OCR is only part of a bank's funding mix.
"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," Kiernan said.
He added that reputational risk could keep banks in line.
"You don't want to get that reputation as being the bank that's ripping everybody off," Kiernan said.
Transparency push targets fixed-rate spreads next
Simplicity economist Shamubeel Eaqub said the FMA's monitoring should extend further, particularly into fixed mortgage pricing.
"I hope they will keep on expanding it because the OCR stuff is only the beginning,” Eaqub said. “The real game is in the fixed mortgage space. The spread over swaps are exceptionally high in New Zealand compared to Australia, for example."
New Zealand Banking Association chief executive Roger Beaumont said the OCR was just one factor shaping bank pricing, alongside offshore funding costs and domestic sources such as term deposits, and noted that disclosure obligations mean banks cannot always adjust pricing for existing customers immediately.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
