The Reserve Bank of New Zealand (RBNZ) is urging banks to lower their mortgage rates following its decision to keep the official cash rate (OCR) at 0.25%.
RBNZ deputy governor Geoff Bascand said the central bank's bond-buying programme and decision to keep the OCR at its current level had reduced banks' wholesale lending rates. Therefore, lenders must do their part to slash their rates.
“We expect to see retail interest rates decline further as lower wholesale borrowing costs are passed through to retail customers,” Bascand said, as reported by Good Returns.
“In one sense, [the banks] are probably a bit cautious there. But as time goes on, and they are more confident that they can fund in different ways and at lower costs, they hopefully will see more of that flow through. We have seen some banks reduce their mortgage rates, but we still think that there is a way to go.”
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The RBNZ also seems to be determined to keep its promise that it would not make further OCR cuts for the next 12 months as it reaffirmed its commitment this week.
“We stick to our commitment. We are keeping the OCR on hold for a year. The committee maintains its forward guidance the OCR will remain at 0.25% until early 2021,” Bascand told Stuff.
“We are very conscious that our word matters and the credibility of what we say is very important to the Reserve Bank. We are confident we won't be moving to negative interest rates before March next year.”