Key Facts

  • Wholesale interest rates have recently dropped by 0.5%.
  • Industry experts are debating whether banks will pass this reduction to mortgage holders.
  • Banks make profits from the difference between the interest rate at which they borrow and lend, which is known as margins.
  • Squirrel’s Chief Executive, David Cunningham, has claimed that both home loan and deposit interest rates should fall as wholesale rates decrease.
  • Recent annual results for BNZ, ANZ, and Westpac displayed an increase in their net interest margins.
  • Despite the dip in wholesale interest rates, Gareth Kiernan from Infometrics predicts that mortgage holders may not experience real relief until the end of next year.

Article Summary

Following a 0.5% drop in wholesale interest rates, there is ongoing discussion regarding the potential for this decrease to be passed on to mortgage holders. David Cunningham, Chief Executive of Squirrel, believes that both loan and deposit interest rates should fall in line with the decrease. The profits banks make from the difference in borrow-lend interest rates, known as margins, are significant, accounting for about half of all bank profits.

Despite this recent decrease in wholesale interest rates, if and when mortgage holders will experience this relief remains uncertain. In the recent annual results for BNZ, ANZ, and Westpac, an increase in net interest margins was reported. However, Gareth Kiernan from Infometrics feels that actual relief for mortgage holders might only be seen at the end of next year.

Nonetheless, Westpac NZ has reported a reduction in its advertised special home loan rates on all terms from two to five years last month. And ANZ has mentioned constantly reviewing its interest rates to align with market conditions. Thus, while the impact of the wholesale interest rates decrease on mortgage holders is a complex issue, it is one that remains an area of focus for banks and industry experts alike.

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