A banking expert says it's no surprise three banks are not passing on the full interest rate cut made by the Reserve Bank.

Yesterday the RBNZ sliced 0.25 off the OCR bringing it down to record low of 2.25 per cent.

ASB , Kiwibank, ANZ and Westpac have announced they will drop their floating home loan rates but not by the full amount.

ANZ and Westpac will shave just 0.10 basis points off while ASB and Kiwibank said they would drop its floating rate by 0.20 basis points and its offset/revolving home loan rate by 0.15 basis points.


The Co-operative bank is the only bank so far to pass on the full cut while Kiwibank is the only one to announce a drop in some of its fixed mortgage rates.

David Tripe, an associate professor at Massey University, said the decision not to pass on the full cut was a reflection of the upward pressure banks were feeling on their funding costs.

"The extra OCR cut is designed to counter the problems caused by rising costs."

Without the cut banks may have had to increase their rates putting more pressure on borrowers, particularly dairy farmers who are already under the gun with falling dairy prices.

Tripe said bank funding costs did not fall in line with the official cash rate and he would not be surprised if The Co-operative Bank chose to keep some of the reduction the next time the cash rate was cut.

Both Westpac and ANZ blamed increased funding costs on the decision not to pass on the full rate cut.

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A spokesperson for Westpac said the adjustment reflected elevated funding costs due to financial market volatility since the middle of 2014.


An ANZ spokesman said over the last 18 months off-shore wholesale funding costs had significantly increased for the bank.

"Until now, and unlike some other banks, ANZ has passed on all the recent OCR rate cuts in full.

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"But international volatility has proved to be more than temporary so these extra costs now need to be reflected in our lending rates."

The ANZ said the change to its floating and flexible rates would not impact most of its customers because 76 per cent of its home loans were on fixed rates.

Around $50.7 billion of New Zealand home loans are on floating rates while $166.9 billion is fixed, according to January figures produced by the Reserve Bank of New Zealand.

Floating rate cuts
ANZ floating rate down 10 basis points to 5.64 per cent
ANZ flexible rate down 10 basis points to 5.75 per cent
Westpac floating rate down 10 basis points to 5.75 per cent
Kiwibank floating rate down 20 basis points to 5.45 per cent
ASB floating rate down 20 basis points to 5.55 per cent
Kiwibank offset/revolving home loan rate down 15 basis points to 5.5 per cent
The Co-operative Bank floating rate down 25 basis points to 5.45 per cent

Fixed rate cuts
Kiwibank three year fixed rate down 10 basis points to 4.75 per cent, four year fixed rate down 35 basis points to 4.90 per cent and five year rates down 36 basis points to 4.99 per cent.

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