Fixed deposit rates have not risen as high as mortgage rates.Photos / files
Mortgage rates have risen sharply in the last six months, but fixed deposit rates haven’t risen that much.
The two-year fixed-term mortgage rate for June was about 2.49 per person.
Cent. Currently, it has risen to about 4.35% at major banks, an increase of 186 basis points.
However, the 6-month fixed deposit interest rate is 1.4% compared to 0.82%. This is an increase of only 58 basis points.
Economist Cameron Bagley said banks quickly left the door as mortgage rates rose.
“Looking at the one-year and two-year swap rates, the movements we’ve seen are pretty much in line with expectations, but the overall picture of asset-side lending pricing on a bank’s balance sheet is deposits. A little mismatch is starting to occur compared to our debt. Lending rates are rising fairly rapidly, but deposit rates aren’t changing that fast. “
He said the bank had incredibly sufficient funds at this time and did not have to pay high interest to attract depositors’ money.
“They have a lot of cash on their balance sheets, so they don’t have to instigate aggressive pricing of deposits, whether they’re savings or time deposit types, and they’re expanding margins. increase.”
Reserve bank data show a net margin. The difference between what banks have to pay to savers and what they get from borrowers is increasing across banks.
It reached 2.04% in the June quarter and fell to 1.98% in the September quarter, but still surpassed the 1.85% obtained in the September 2020 quarter.
“Some of them are reversing some of what we saw in 2020, but it’s pretty clear what the current situation of margin expansion looks like.”
Bagrie pointed out the fact that banks have reduced their funding costs over the last two years and savers have shifted their funds from time deposits to savings accounts where banks pay much less interest.
As of October, bank savings increased from $ 85.8 billion two years ago to $ 121 billion, and time deposits decreased from $ 195 billion to $ 153.6 billion.
“Banks were a big winner in the transition from time deposits to savings accounts.”
“The relative difference between what you get with your savings account and what you pay with your one- and two-year time deposits is pretty big. Banks still have access to very cheap funds. I am.
“Especially we see rising long-term deposit rates, but New Zealanders tend not to jump into that. They are willing to detain one-year time deposits, but not three years. , Tied up a lot of money for four or five years. “
What’s more, banks have access to very cheap financing through preparatory bank financing for lending programs that allow banks to borrow money at the official discount rate, which is currently only 0.75%. ..
Bagrie said no doubt funding for lending should not have been introduced.
“This is a crisis management tool when the banking sector is incredibly well funded. You’re not running out of cash. In fact, you’ve been swimming in cash for the last 12 months. The real estate market is booming. Banks are still receiving huge amounts of cash, balancing transactions and savings. “
So are banks stripping savers?
Bagley said it was a bit harsh to pull off.
“But what’s happening here, and what we’ve seen for a long time, was margin reduction on the asset side of banks’ balance sheets, more aggressive pricing for things like mortgages- Mortgage holders have long benefited How was it partially funded by compressing the returns offered to depositors on the other side? “
So far, there have been few signs that savers are rushing back, even though interest rates on time deposits have risen slightly, Bagley said.
“What we have begun to see broadly is that outflows and surges in time deposits have begun to slow, but the latest data for September shows that the balance of time deposits in August is still declining compared to the previous month. The rate has slowed fairly sharply. We will see a change in direction in the next 12 months. “
A BNZ spokesman who raised one of the savings interest rates yesterday said mortgage pricing is based on a variety of factors, including OCR, funding costs from other sources, cost of capital, and risk. Said.
“Savings and time deposit rates are a factor in this, but their pricing is set on different criteria, for example, global swap rates bounced back and there was uncertainty about rising OCR. The underlying factor of this has become unstable recently. “
He said the market for savings products is very competitive and despite these challenges, the savings rate is steadily increasing.
“By 2021, the deposit interest rate for the 8th term has been raised so far, and the standard savings account Rapid Save is now at an annual rate of 0.45%, which is higher than all of our competitors’ on-call savings accounts. Bonus savings rate.
“In July, the savings market by offering all BNZ customers with Rapid Save accounts all interest rates, including bonus interest rates, whether they increase, maintain or even decrease their balances. I shook. “
A spokeswoman for ANZ New Zealand said the two-year mortgage fixed rate and the six-month fixed rate were not comparable and were affected by a variety of price factors.
“A better comparison is the two-year TD on June 1st. [term deposit] The interest rate was 1.10 percent, but now it is 2.50 percent, an increase of 140 basis points.
“There are many factors that make up pricing, including wholesale swap rates. The biggest move since June has occurred at long-term swap rates, which is reflected in the big moves in long-term rates. “
She said banks constantly valued deposits and lending rates to ensure they were fair and competitive and balanced the needs of savers and borrowers.
Mortgage rates have skyrocketed, but deposit rates are still low. Are banks stripping savers?
Source Mortgage rates have skyrocketed, but deposit rates are still low. Are banks stripping savers?