interest.co.nz analysis reveals bank responsiveness to OCR
New Zealand’s housing market looks poised for a rebound in 2025, fuelled by a competitive mortgage rate environment and recent cuts by the Reserve Bank that are reshaping borrowing trends and lifting property values.
In this evolving financial landscape, major banks have shown differing levels of responsiveness in adjusting their mortgage rates following changes in the official cash rate (OCR).
Since the OCR began its descent in August last year, Kiwibank has emerged as the slowest among the major banks to lower its floating mortgage rates for existing customers.
This finding emerges from a detailed analysis by Interest.co.nz following public scrutiny of bank responsiveness at a parliamentary banking inquiry.
Banks’ reaction to economic policies
Interest.co.nz undertook a comprehensive review of the time taken by ANZ, ASB, BNZ, Westpac, and Kiwibank to adjust their floating mortgage rates following each OCR decision since August.
The review was initiated after queries about banks’ responsiveness to OCR changes became a focal point during ANZ CEO Antonia Watson’s (pictured left) testimony at the inquiry.
Floating rates were specifically analysed because they typically react first to OCR changes.
Despite the popularity of fixed-term rates, floating rates remain crucial, especially in a declining interest rate environment where they influence both personal and business lending.
Comparative delays across banks
From the onset of the OCR's decrease, Kiwibank averaged 13.5 business days to adjust its floating rates for existing customers, the slowest among the banks studied.
A Kiwibank spokesperson explained the rationale behind their timing: “This includes the time to send customers the required disclosures. Importantly, over the past five years, Kiwibank has consistently had one of the lowest variable rates compared to the larger banks.”
In contrast, ASB and BNZ led the pack, adjusting their rates in just 7.75 business days on average, demonstrating a significantly quicker response to the central bank’s decisions.
“Whether rates are rising or falling, we work hard to be consistent with the time taken to execute variable rate changes post OCR adjustments, as changes impact both our saving and lending customers,” an ASB representative told NZ Adviser.
“For the periods highlighted we were one of the first banks to adjust rates both as the OCR rose, and as it fell. We reduced floating mortgage rates on average 2.85 business days faster than we increased them.”
ASB has noted that regardless of how variable rates change, there are required processes to meet lending obligations that affect the timing of implementing rate changes. They have managed to shorten the timeframes for passing on these rate changes to customers over the past nine months and are continuing to make further improvements.
Market power and rate delays
The disparity in response times has not gone unnoticed.
The Banking Reform Coalition (BRC), led by economic consultant Kent Duston, has vocally criticised the delays, asserting that banks should pass on rate cuts immediately.
Following a well-anticipated 50 basis point cut in February, Duston highlighted that the banks had ample notice to prepare for the change, suggesting that any delays in passing these cuts directly harm consumers financially.
Impact on borrowers
This variability in response times can significantly impact borrowers, influencing decisions on refinancing or purchasing new properties.
The slower adjustments, particularly in a decreasing rate environment, can delay benefits that borrowers could otherwise enjoy sooner, interest.co.nz reported.
Challenges in rate implementation
The speed at which banks can adjust rates is often hampered by their IT systems.
For example, ANZ’s Watson admitted to technological limitations that sometimes delay rate adjustments.
Similarly, BNZ chief executive Dan Huggins (pictured right) acknowledged the complexity involved in their systems that affects the timing of rate changes, emphasising ongoing investments in system upgrades to improve responsiveness.
Note: This article has been updated to reflect comments from ASB.
