Pressure growing on banks to cut mortgage rates

All across NZ, Kiwis are dealing with high mortgage payments. But banks that have lent nearly $350 billion to those owner-occupiers and landlords are not passing on a slide in global and local wholesale interest rates. Photo: Lynn Grieveson / The Kākā

TL;DR: It is the cost of living pressure that neither flavour of Government nor the Reserve Bank have complained about, but it’s the inflationary ‘thief in the night’ that could quietly costs borrowers and savers an extra $1.8 billion this year.

A new analysis has found bank profit margins on mortgages have risen around 50 basis points in the last three months because the banks that have lent nearly $350 billion to owner-occupiers and landlords have not passed on a slide in global and local wholesale interest rates through October and November.

If sustained, the extra 50 basis points would boost pre-tax profits from the big five banks¹ by another $1.8 billion to $10.9 billion a year, which equals $5,700 per year for each household or $2,050 per year for each New Zealander. Bank profits are currently worth about $39 per person per week and the margin increase would be worth an extra $6.50 per person per week.

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Bank profit margins on mortgages up 50 bps