Latest / The SME Stream / Liam Dann: NZ Herald business editor at large on how the banks responded to latest OCR cut

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Liam Dann: NZ Herald business editor at large on how the banks responded to latest OCR cut · The SME Stream

• 0:00
  Speaker 1: And everyone is very excited as we know about the
• 0:03
  Speaker 1: Reserve Bank cutting the OCR but other banks passing it on.
• 0:05
  Speaker 1: Liam dan As the Herald's Business, the editor at large,
• 0:07
  Speaker 1: it's been taking a look at it, ALM, did I Heather?
• 0:10
  Speaker 1: So they passed it all on?
• 0:11
  Speaker 2: Or what? I haven't seen anything today. I mean, look,
• 0:16
  Speaker 2: A and Z went early with a bit of a
• 0:18
  Speaker 2: cat to fixed interest rates on Tuesday night, and I've
• 0:22
  Speaker 2: seen the banks. Now the banks more or less match that,
• 0:26
  Speaker 2: but that's like twenty basis points and it was before
• 0:29
  Speaker 2: the actual ocer cut. They passed on the floating rates.
• 0:32
  Speaker 2: So and you get all the press releases about that
• 0:34
  Speaker 2: on the minute in fact that you know, they were
• 0:37
  Speaker 2: arriving before we'd even received the news just about But yeah, look,
• 0:42
  Speaker 2: I know we're sort of thinking we're gonna get Nicola
• 0:46
  Speaker 2: Willis's words relief for regular Kiwi mortgage holders and all
• 0:50
  Speaker 2: that sort of stuff, but not March, and not unless
• 0:52
  Speaker 2: there's a bit of competition brewing. It looks like they've
• 0:55
  Speaker 2: sort of all stared at each other and said, are
• 0:57
  Speaker 2: you going to cap them? And it's like, well maybe.
• 1:00
  Speaker 1: But how much it was already priced in and had
• 1:02
  Speaker 1: been cut in advance.
• 1:04
  Speaker 2: Well, that twenty basis points is about as good as
• 1:07
  Speaker 2: it's going to get.
• 1:08
  Speaker 1: I guess, right, is that the twenty basis points, Like,
• 1:10
  Speaker 1: have you measured from the last OCR cuts to this
• 1:13
  Speaker 1: OCR cup That whole duration is only twenty basis points.
• 1:16
  Speaker 2: They did well, They passed through the full fifty pretty
• 1:20
  Speaker 2: well on the last one. And then I mean, yeah, look,
• 1:24
  Speaker 2: there are reasons that they will look to their overseas
• 1:28
  Speaker 2: borrowing costs having gone up because everybody's worried about you know,
• 1:31
  Speaker 2: what Donald Trump might do to inflation in the US,
• 1:34
  Speaker 2: and so the bond yields are all up over there,
• 1:36
  Speaker 2: so that's lifted the borrowing costs. And yeah, I guess
• 1:39
  Speaker 2: the wholesale markets price a bit in, But then you
• 1:42
  Speaker 2: know it's still it does still come back to competition.
• 1:46
  Speaker 2: If you had, you know, a keen bank ready to
• 1:50
  Speaker 2: grab a bit more competition, they might go and if
• 1:52
  Speaker 2: one of them goes, and look, it could still happen.
• 1:54
  Speaker 2: It's only been just over twenty four hours. But I
• 1:57
  Speaker 2: just feel like if you were sitting there waiting, you know,
• 2:00
  Speaker 2: to to cash in on the on the big great cut,
• 2:04
  Speaker 2: you know, fifty basis points is a double not much
• 2:07
  Speaker 2: there for you.
• 2:08
  Speaker 1: So what's going on? Is it just because they don't
• 2:10
  Speaker 1: have to or is there something else that's playing into this.
• 2:13
  Speaker 2: Well, I think it's a combination. So I don't want
• 2:15
  Speaker 2: to put it all on the banks. But because because
• 2:17
  Speaker 2: there are those international forces, they did all see it coming.
• 2:20
  Speaker 2: So we got out to any basis points, I guess,
• 2:23
  Speaker 2: starting on the Tuesday, and then then quietly sort of
• 2:26
  Speaker 2: and I'm sort of talking about the one year, one
• 2:29
  Speaker 2: year sort of fixed rate roughly, you know, one to
• 2:33
  Speaker 2: two year fixed rates, where a lot of Kiwis are
• 2:35
  Speaker 2: Kiwi's are really more six months and a year at
• 2:38
  Speaker 2: the moment because they've stayed short because they're expecting to
• 2:41
  Speaker 2: see it come down. But you know, Adrian Ows warned unfortunately,
• 2:46
  Speaker 2: unless we see a change in the sort of the
• 2:48
  Speaker 2: global outlook, and you know, he does say, look, it'll
• 2:52
  Speaker 2: be nice if the banks were repaired to pass on
• 2:54
  Speaker 2: a bit of the margin. At this point, the margins
• 2:56
  Speaker 2: are still higher than the average pre COVID. But unless
• 3:00
  Speaker 2: we see that, you know, it's going to take some
• 3:02
  Speaker 2: quite big cuts, and they're talking about going down to
• 3:05
  Speaker 2: three with the ocr but it's not going to pass through.
• 3:09
  Speaker 2: That's another you know, one point two five percent, but
• 3:12
  Speaker 2: really it's not going to be that big a pass through,
• 3:14
  Speaker 2: so that sort of creates a bit of problems, a
• 3:16
  Speaker 2: bit of a headwind for that interest rate lead recovery.
• 3:19
  Speaker 2: I guess.
• 3:19
  Speaker 1: Yeah, interesting stuff. Hey, thank you very much. I really
• 3:21
  Speaker 1: appreciate that. Lem. That's Liam Dan, the Herald's Business editor
• 3:24
  Speaker 1: at large.