Banks rarely pass on full official cash rate cuts to mortgage holders, Reserve Bank data shows. They do, however, pass on most of the increases to the OCR to homeowners.

Labour leader Andrew Little this week criticised banks for not passing on full rate cuts to mortgage holders.

After the Reserve Bank cut the OCR from 2.5 per cent to 2.25 per cent on March 10, only the Co-Operative Bank cut its floating mortgage rate by the full 0.25 points. ANZ, Westpac, ASB, Kiwibank and BNZ made partial cuts, pocketing the difference.

Figures published by the Reserve Bank showed that the companies generally did not pass on full rate cuts to floating mortgage holders or did not pass them on immediately.


After the previous OCR cut of 0.25 per cent in December, banks cut floating mortgage rates by 0.1 points on average. They made similar changes after an OCR cut in October, though banks passed on more of previous OCR cuts in August and July. When the Reserve Bank hiked the OCR three times in 2014, banks usually passed on most of the increase immediately.

The data also revealed that retail banks typically did not pass on full rate increases to savers who had money in fixed term deposits.

Bankers' Association acting chief executive Antony Buick-Constable said a range of factors were taken into account when banks considered their deposit and lending rates.

"The Official Cash Rate [OCR] is an important driver of any interest rate changes," he said. "However, other factors also influence the level of an interest rate change, including market conditions, cost of capital, cost of international wholesale funding, operational expenses and expected losses.

"Interest rates can move in both directions depending on these factors."

Mr Buick-Constable said any adjustments needed to consider short- and long-term outlooks and address not only domestic factors but international factors like financial volatility and increases in wholesale funding costs.

"Rates generally move in conjunction with the OCR, but are not exactly the same due to these other factors that need to be considered."