Banks offering fair floating interest rates

massey-university

Wed Jul 08 2009 12:00:00 GMT+1200 (New Zealand Standard Time)

Banks offering fair floating interest rates

Wednesday, 8 July 2009, 3:00 pm
Press Release: Massey University

Banks offering fair floating interest rates

Although the perception is that floating mortgage interest rates being offered by banks are still too high, there is little the Reserve Bank can or should do to induce banks to lower them further. That is the view of Massey University senior lecturer in Banking Studies, Claire Matthews, following renewed calls by the Government for the Reserve Bank to offer some solutions.

The Reserve Bank again this week raised concerns about the floating mortgage interest rate following their analysis of interest rate margins.

“Banks are doing the best they can to offer the lowest floating mortgage rates, and that is in fact reflected in the Reserve Bank’s latest report,” says Mrs Matthews.

“The Official Cash Rate (OCR) has reduced 575 basis points, the floating rate has come down 430 basis points, and the difference between is needed by banks to cover the increased cost of raising funds.”

Despite the feeling that there is still room for banks to lower rates further, Mrs Matthews believes that is not the case because if they could, they would.

“It is in their interests to be competitive, and having seen their recent profit announcements, they are not doing as well as they have done in the recent past,” she says.

“We want them to make a profit otherwise they could collapse as banks have in other parts of the world, and as we have seen finance companies do in New Zealand, and people would be losing their money.”

In a select committee report last month, MPs criticised banks for not reducing mortgage rates and protecting their profits, but last week they voted down holding another inquiry into the banking system.

ENDS

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