We review the OCR rate holdbacks, the third consecutive time banks have done this and their most aggressive to date. Customers just take it

(Yes, it is a real bank, in a tiny town of the same name in rural Missouri, USA. A sense of humour is required to live there. Their bank is surprisingly successful and now has two branches.)

By now, most banks have passed through their fraction of the August 11 RBNZ OCR cut.

Now is a good time to review the upshot.

The initial decisions by both Westpac and ANZ earlier in the year has given the industry ‘permission’ to hold on to some or most of the official cuts. And the growing boldness now extends to some retaining all the reduction for themselves.

Some public policy makers have said that it is “up to the market” to determine these rates.

The “market” is working on the supply side at least. Banks have held on to most of the cuts.

The pushback in the public conversation has been limited.

And there is little evidence that homeowners, or more importantly SMEs or farmers have moved banks as a consequence.

The banking industry has effectively gotten a free pass here.

And it is interesting to note that it is both the largest (ANZ) and smallest (Cooperative Bank, TSB Bank) that have been the most aggressive in retaining most or all of the latest reductions.

The banking industry clearly feels little threat, pressure or pushback from either regulators or consumers. Certainly there is little competitive retail rate pressures from within the industry.

As we have noted earlier, this is the third consecutive OCR change where retention has been the industry response. And this August 11 event has shown the most aggressive response by banks yet. It seems reasonable to expect an even more selfish response if the RBNZ cuts again on November 10, as many observers expect. (There is an official September 22 review in the meantime, but the RBNZ has recently signaled that it prefers a full MPS to change the OCR – which in turn makes you wonder why they have interim reviews.)

So, any market discipline of banking behaviour in this matter now seems up to borrowers. Unless they choose to change, the bank behaviour pattern is unlikely to be different.

The institution with the lowest floating rate is now Resimac, who changed its floating rate on Friday to 5.19%.

The bank with the lowest floating rate is now Kiwibank at 5.25%.

Otherwise, almost all banks now offer floating rates in the relatively tight range of 5.55% to 5.65%, with the Cooperative Bank now the only other bank outside that range.

See all banks’ carded, or advertised, home loan rates here.

Floating Prior rate New rate Change effective from
  % % % for existing clients
RBNZ OCR 2.25 2.00 -0.25 11 August 2016
5.64 5.59 -0.05 29 August 2016
ASB 5.65 5.55 -0.10 24 August 2016
5.69 5.64 -0.05 29 August 2016
Kiwibank 5.45 5.25 -0.20 29 August 2016
Westpac 5.75 5.65 -0.10 31 August 2016
5.45 5.45 -0.00 [no reduction so far]
HSBC 5.75 5.59 -0.16 17 August 2016
ICBC 5.60 5.60 -0.00 [no reduction so far]
HSBC 5.69 5.54 -0.15 18 Sept 2016
5.54 5.54 -0.00 [no reduction so far]
Resimac 5.34 5.19 -0.15 29 August 2016