NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Companies / Banking and finance

Bernard Hickey: Are NZ banks about to raise interest rates?

Bernard Hickey
By Bernard Hickey
Columnist·Herald on Sunday·
13 Feb, 2012 01:45 AM6 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

Are NZ banks about to follow in the steps of their Australian parents and start hiking interest rates despite no central bank move? Photo / Sarah Ivey

Are NZ banks about to follow in the steps of their Australian parents and start hiking interest rates despite no central bank move? Photo / Sarah Ivey

Bernard Hickey
Opinion by Bernard Hickey
Bernard is an economics columnist for the NZ Herald
Learn more

ANZ and Westpac announced increases in their floating mortgage rates in Australia on Friday, even though there had been no change in the Official Cash Rate.

They argued the cost of their foreign borrowings had increased substantially and they needed to pass this cost on to customers.

The move triggered sharp criticism from the Australian government and is expected to be followed by similar rate reviews in Australia by Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB), who own ASB and BNZ respectively here.

So will the New Zealand arms of these same Australian banks do the same here for the 60 per cent of borrowers who are now on floating mortgage rates? And if they do, can it be justified?

It's worthwhile looking first at what has happened in Australia. The move late on Friday by ANZ to increase its floating mortgage rate by 6 basis points to 7.36 per cent came as a surprise because many borrowers had been hoping the Reserve Bank of Australia would cut its official rate and that banks would pass on most, if not all of those cuts.

Advertisement
Advertise with NZME.
Advertisement
Advertise with NZME.

Instead, the Reserve Bank held its official rate at 4.25 per cent and now two of the big four have actually increased their rates.

This has been brewing for some time in Australia. ANZ announced in December it would start reviewing its floating mortgage rates independently of any moves in the official rate in Australia, signalling it saw floating mortgage rates as disconnected from the official rate because of a rise in foreign borrowing costs.

But the decision on Friday to hike without any 'cover' from the Reserve Bank was still a surprise. Westpac's decision within hours to lift its floating mortgage rate by 10 basis points to 7.46 per cent deepened the shock.

Australian Treasurer Wayne Swan attacked the decision and encouraged bank customers to change banks. Here's what he was reported as saying in the Sydney Morning Herald, which led with the story through the weekend and again this morning:

"I think ANZ customers will be absolutely ropable with the ANZ," Swan said this afternoon. "The fact is that the major banks in this country are very profitable. Their net interest margins are back to where they were prior to the global financial crisis.

Discover more

Opinion

Brian Fallow: Failings at school will hurt our economy

08 Feb 04:30 PM
Banking and finance

World shares weaken on Greek limbo

08 Feb 06:30 PM
Banking and finance

Floating mortgages help big banks to lift earnings

09 Feb 04:30 PM
Opinion

Bernard Hickey: Tough reality in a world of hurt

11 Feb 04:30 PM

"And what I say to Australians who are observing these decisions, this one from the ANZ, is you do have the capacity to walk down the road and get a better deal."

Prime Minister Julia Gillard chimed in with a similar call for customers to change banks, although News.com.au noted that Gillard herself had not changed the mortgages on her home and investment property from Westpac. Other Australian ministers are also apparently stable customers of ANZ.

Advertisement
Advertise with NZME.

The Australian banks have form on this. All of the big four have at various times in the last three years either not passed on all of any cuts in the official cash rate when it was being cut, or increased their floating rates by more than the increase in the official rate.

The biggest political and customer backlash was reserve for New Zealand's Ralph Norris, who was Chief Executive of Commonwealth Bank of Australia. A effigy of Norris was burnt in Sydney and a slump in customer satisfaction ratings cost him millions in bonuses personally because his bonuses were tied to customer satisfaction.

But will it happen here?

New Zealand's bank chief executives have been cautious about moving too quickly to talk about pushing up floating rates earlier (or by more) than any increase in the Official Cash Rate (OCR). BNZ CEO Andrew Thorburn said last year that there had been a 'decoupling' between the OCR and floating mortgage rates.

But apart from a slight rise in BNZ's main floating mortgage rate to remove its discount to the rest of the market, the other big three have been very quiet.

There's a few reasons for this difference. New Zealand lending growth has been much more subdued in the last three years than Australian lending growth. Also, New Zealand bank profit margins have actually been increasing in the last couple of years.

Advertisement
Advertise with NZME.

Reserve Bank figures show retail bank net interest margins have risen from a low of 1.85 per cent in November 2009 to a high of 2.33 per cent in August 2011. That's because New Zealanders have been moving from being mostly in fixed mortgages, which are less profitable for the banks, to being mostly in floating mortgages, which are profitable for the banks.

However, those margins have started to edge down since August and stood at 2.25 per cent at the end of December.

That's because of the costs of the European financial crisis are flowing through again into the cost of the banks' foreign borrowings. They have been issuing covered bonds in recent months that have cost more than 200 basis points over the benchmark rates, which is much more than quadruple the costs from before the Lehman Bros collapse of late 2008.

How much profit is too much?

However, New Zealand bank profits are at record highs by various measures, despite the slowdown in lending growth in recent years and the rise in foreign funding costs.

This debate is one between shareholders and customers. Who should bear the burden of these higher funding costs. Banks would argue shareholders expect a return and if that return falls then they may invest less in these banks, which would constrain lending and the economy.

Advertisement
Advertise with NZME.

Customers would argue that bank profits are high enough and the banks have a responsibility to support the economy.

We will find out in the months to come how this tension plays out. It will depend, in part, on how competitive the banking sector is and how much regulatory or political pressure the banks come under.

It could be argued there is less competitive pressure in Australia, which is allowing the banks to push through the rate increases. Many of the large rivals to the big banks were gobbled up after the Global Financial Crisis. However, there is also much more regulatory and political pressure on the banks not to pass it on.

The ultimate price?

The other factor to consider is whether any delay in passing on the higher funding costs is just delaying the inevitable result of the Global Financial Crisis and New Zealand's own heavy foreign indebtedness.

This may be the moment when borrowers' views on rates being forced ever lower for longer is given a reality check.

Advertisement
Advertise with NZME.

INTEREST.CO.NZ

Save

    Share this article

Latest from Banking and finance

Banking and finance

Rishi Sunak returns to Wall Street bank he joined as intern

09 Jul 12:07 AM
Premium
Companies|banking and finance

NZ’s largest taxpayers revealed - does big business play fair?

01 Jul 05:00 PM
Banking and finance

Watercare secures $3.4b debt facility, largest for NZ corporate

30 Jun 05:00 PM

From early mornings to easy living

sponsored
Advertisement
Advertise with NZME.

Latest from Banking and finance

Rishi Sunak returns to Wall Street bank he joined as intern

Rishi Sunak returns to Wall Street bank he joined as intern

09 Jul 12:07 AM

His pay will go to his charity, the Richmond Project.

Premium
NZ’s largest taxpayers revealed - does big business play fair?

NZ’s largest taxpayers revealed - does big business play fair?

01 Jul 05:00 PM
Watercare secures $3.4b debt facility, largest for NZ corporate

Watercare secures $3.4b debt facility, largest for NZ corporate

30 Jun 05:00 PM
Big Reserve Bank scheme to protect Kiwis' savings launching

Big Reserve Bank scheme to protect Kiwis' savings launching

29 Jun 05:00 PM
Solar bat monitors uncover secrets of Auckland’s night sky
sponsored

Solar bat monitors uncover secrets of Auckland’s night sky

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP