Experts say impact on home loan rates could be significant
The Reserve Bank of New Zealand (RBNZ) has raised the capital requirement for New Zealand banks – and experts say the impact on home loan rates could be significant.
The central bank made the decision following a comprehensive review of its capital framework for banks.
RBNZ downplayed the impact on interest rates, saying it expected the changes “could lead to around a 20 basis point (0.2%) increase in the average lending rates banks charge, once the changes are fully implemented.”
However, some experts are saying that the impact could be much larger.
“A back-of-the-envelope update of our previous modelling of the impact of the RBNZ's proposed changes suggests a 30 to 60 basis point impact on the cost of credit,” said Sharon Zollner, chief economist at ANZ.
Meanwhile, Westpac senior economist Michael Gordon, senior economist at Westpac, estimated that the impact on lending rates would be about 40 basis points.
"We had estimated that the initial proposal would cause a 50-basis-point widening in the margin between bank lending rates and deposit rates by the end of the phase-in period, and a 1% reduction in the long-run level of GDP,” he said “However, we had anticipated some softening of the proposal, and factored a 40 basis point margin widening into our forecasts.”
