By Gareth Vaughan
Bank funding costs have continued falling, the Reserve Bank says, with long-term overseas borrowing costs down about 75 basis points year-on-year.
The Reserve Bank's June Monetary Policy Statement notes domestic banks are currently well funded, with annual deposit growth of around 10%.
"The major banks are finding it relatively easy to obtain additional long-term funding from offshore markets. Since the March Monetary Policy Statement (MPS), the four major banks have issued more than $2.3 billion of senior unsecured long-term debt (of more than three years maturity) in various markets," the Reserve Bank says.
"The weighted average price of these deals when swapped back into New Zealand dollar floating rates was about 115 basis points over the reference rate (BKBM), approximately 75 basis points below year ago levels."
The Reserve Bank's comments come after KPMG said in its most recent Financial Institutions Performance Survey that average bank funding costs fell to 3.80% in the December quarter, a five-year low.
The Reserve Bank also noted that with banks able to borrow long-term money cheaply offshore, pressure on retail deposit rates has been downward over recent months.
"The average six-month term deposit rate for the four major banks is down 15 basis points to 3.81% since the March MPS. Some banks have also lowered rates on their call savings accounts," the Reserve Bank said.
See all advertised term deposit rates here.
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