New data from the Financial Markets Authority (FMA) shows that home loan borrowers on variable interest rates have felt the full impact of the most recent official cash rate increase – but savers have not.
The FMA has been tracking interest rate changes and the time taken for them to affect new and existing customers with floating rate mortgages and on-call accounts.
It said it requested information from eight financial institutions that provided 98 percent of the housing loans in New Zealand.
Its data shows that all banks passed on at least the entire q25 basis point official cash rate (OCR) increase of earlier this month to their floating home loan rates.
The Co-Operative Bank passed on slightly more.
Banks have also increased their fixed home loan rates.
On-call savings accounts received an increase of anything from nothing at ASB to five basis points at ANZ, through to 20 basis points at The Co-Operative Bank.
Savers received less of an increase this time than they did at the last OCR review.
Simplicity chief economist Shamubeel Eaqub described it as a “sad state of affairs”.
“It’s a worry that people have so much money in term deposits. Why do they bother? Park it in a conservative fund.”
Gareth Kiernan, acting managing director and chief forecaster at Infometrics, said floating rates were now comparable with what they were before the Reserve Bank cut the official cash rate from 3 percent to 2.5 percent last October.
“Whereas the OCR is currently lower, at 2.75 percent. The savings rates were less responsive on the way down, so I’d expect them to be less responsive on the way up as well, particularly when the OCR is still reasonably low.
“However, in general the deposit rates are still slightly below where they were before the October 2025 cut – so there seems to be a bit of a discrepancy between how savings and mortgage rates have evolved over the last year. It might be that, because there’s not a lot of demand for borrowing at the moment due to the soft housing market, banks have a relatively good supply of deposit funds coming in, so they don’t the need to try and entice more funds in the door by pushing up deposit rates.”
When the Reserve Bank updated the OCR, it urged banks to lift term deposit rates. Its data shows one-year term deposit rates are paying an average 3.94 percent, up from 3.85 percent in June and 2.79 percent a year earlier.
Eighteen-month term deposits are paying an average 4.13 percent from 3.86 percent a year earlier.
But six-month term deposit rates have barely moved this year and at an average 3.55 percent are down from 3.88 percent in August last year.
This week, ASB senior economist Chris Tennent-Brown said one-year term deposit rates were at an average of 3.9 percent, compared to a low of 0.75 percent in 2020 and 2021, and a high of 6.1 percent during 2023 to 2025. “We think the bias will be up for the shortest terms and expect the longer-term rates to remain around current levels.”
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