Reserve Bank: fixed rates reasonable but floating rates too high
The Reserve Bank has just released its own analysis of interest rate margins in response to speculation banks aren’t passing on enough of the cuts to the Official Cash Rate.
The Reserve Bank notes that about 100-150 basis points of the OCR cuts have been offset by higher marginal funding costs for deposit and wholesale funding for banks, and a large part of the cuts have been passed on, “reflecting the soundness of New Zealand banks.”
The report also praises Westpac’s recent paper Funding it tough: a detailed look at bank funding costs for providing useful information, but takes issue with the use of average funding costs as a basis for justifying marginal pricing decisions because “the interest rate on a bank’s latest loan will more likely reflect current marginal funding costs than historical average costs.”
Translation: don’t try your sleight of hand with us boys.
Taking into account the higher marginal costs of funding and increased credit risks, the report concludes that the pricing of floating-rate mortgages appears unusually high over recent months and believes there is some scope for further reductions in these rates without compromising the viability of this lending.
However, the Reserve Bank also said that on balance, the pricing of the banks’ fixed-rate lending products is reasonable given the underlying cost of funds and taking into account the margins typically earned on these products over time.
Talks are continuing with the major banks in order to “clarify” recent trends in their funding costs and margins, but the official result of these talks won’t be released until the Bank’s November 2009 Financial Stability Report.
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Comments
how low
How low should they go ,thats FLOATING RATES.
Deposits
Does this mean the interest rates on hard earned deposits should be lower? That will encourage people to save!!!
Come on Bollard, stop bank bashing and get you forecats straight.
interest rates
the reserve bank needs to think about savers/retirees & stop its drastic cutting of interest rates!
interest rates
bollard needs to get a better balance between the needs of savers & borrowers he has a tendency to swing from one extreme to the other!
Interest rates
Well if this is the case then, why the heck isn't Kiwi Bank leading the way, and setting the benchmark?? if they go broke, well it's us the taxpayer, that will have to bail them out, so Bollard will really have hands on.
Cheers.
Wills.
interest rates
Everybody, get a life. Since when has a means of exchange had any "extra" value? Money "in the bank" is your savings for your tomorrow needs, nothing more nothing less. If you want to "speculate" on "which way the markets will go?" that's your choice, take a punt on whatever is your fancy, but don't complain if you loose. No one should expect a "return" on money not yet spent. Sure, it should still retain it's same "buying" power but it doesn't. Inflation "forces" prices UP!! Productivity and production can "force" prices down, just look at the prices of "new" technology now available for you. The balance "should" be a 0% differential. You want to save for tomorrow, good on you, but please don't expect me to be bankrolling any speculative gains for you.
Banks are gouging
Well with the OCR at 2.5% Bank lending to business is around 10%,A nice littler earner , maybe even legal theft.
Peddling new schemes
@Jones
Banks have had their nice little offshore tax loopholes stitched up, but that's not going to stop them stealing from the tax payers, if if it is legal theft, do you think any of them are worried about doing time behind bars?
The only way to get change in this country is to vote for it, but do you see any of our politicians standing up and seriously taking issue with the banks on behalf of voters .. nah!
So long as we have cowards for politicians, and so long as we're stuck with 2 main political parties, each just a slightly different shade of gray than the other, Kiwi's will continue to be fleeced by banks, and anyone else with enough bucks to bribe politicians.
And as for the reserve bank, it's time to regulate the NZ dollar and do away with foreign meddling in our economy and putting our exporters out of business. But all John Key can do is throw a dumb grin, like he's just rolled out of bed.
Wake up Key, Romes burning and your looking like Nero!
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