PM and Little at odds over mortage rates

by Maya Breen15 Mar 2016
Labour leader Andrew Little has warned the big banks to pass on the official cash rate cut made by the Reserve Bank or he will take measures to give them no choice.

Andrew Little said a serious question to ask was, what was the the point of the OCR "if banks are not going to follow the guidelines?", according to Fairfax Media. 

Little has said he would consider legislating to force them to pass on reduction, though if he did it would be "with great reluctance and a heavy heart".

After the OCR cut was made last week, the big banks have not passed on the full 25 basis point cut, staying within the range of 10-20 basis point cuts.

The government was quick to reject Little's move, with John Key saying the Labour leader's comments show 'a lack of understanding of banking,' according to the New Zealand Herald. 

"What he's basically saying is when the Reverse Bank puts the base rate up, he would be forcing home owners to pay a higher interest rate," said Key.

He added that lending rates were influenced by other factors along with the OCR, especially international costs of borrowing.

Finance Minister Bill English said forcing banks to cut interest rates was a bad idea.

"We've tried politicians setting interest rates before back in the 1970s and 80s and it doesn't work."

Little said he would start with "pretty serious talking, you might say 'stiff-arming'". 

"If they are not responsive to that I guess you've got to look at your option," said Little.

"When you're in government you have the power to legislate but I think you've got to have a pretty serious talk to the banks about expectations," Little said.

"If the Government's expectation is that the banks will pass on - certainly in this case drops in the OCR [Official Cash Rate] - to lenders from banks then the Government should state that and be very firm about it and remind banks it does have powers banks don't have."
 

COMMENTS

  • by Annoyed with banks 15/03/2016 5:11:31 p.m.

    I'm a National supporter, but in this argument I'm with "Little" the big banks are milking the system. Their excuses of cost of funds is a load of rubbish, just listen to the CEO from the people's bank! He agrees with the reserve banks recommendation, saying their is no reason to withhold the full reduction of 25 basis points!!

  • by Sparks 16/03/2016 10:10:44 a.m.

    It's interesting the Banks not passing on the full OCR reduction are Australian owned. NZ is seen as a profit centre. The bottom line is all important, to the extent of all else. They are big enough to give the thumbs up to the Government and will continue to do so. Customers can protest by transferring their business to the Banks that have acted in the spirit of the OCR cuts.

  • by NoNonCents 17/03/2016 9:27:47 a.m.

    Banks are a business like any other, albeit bigger than most. If Government should be allowed to control the price they charge (rather than influence it) should they be allowed to control the price other businesses can charge for their goods and services? If the Banks don't get their income from interest they'll get it from fees. If they cant get it from fees they'll close down branches and sack people. Be careful what you wish for.

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