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Westpac follows ANZ, only cuts floating rate by -10 bps to 5.75%, spurning the RBNZ

Westpac follows ANZ, only cuts floating rate by -10 bps to 5.75%, spurning the RBNZ

Westpac has today followed the ANZ by cutting their floating rate by only -10 bps after the RBNZ cut the OCR by -25 bps.

They issued this short statement:

Westpac NZ is reducing its floating rates by 10 basis points to 5.75% in response to this week's OCR move. This applies to Choices Floating, Choices Everyday and Choices Offset.

'This adjustment follows yesterday's OCR cut but also reflects elevated funding costs due to financial market volatility since the middle of 2014.' said a Westpac NZ spokesperson.

This rate will be effective on 14 March 2016 for new customers and 29 March 2016 for existing customers.

Like ANZ, they have made no reference to any reductions for other types of variable rate lending to sectors like farming or small business.

Yesterday, swap rates fell very sharply following the RBNZ MPS; 90 day bank bill rates fell even more. And CDS spreads continued their recent easing trend.

The Cooperative Bank led the changes, passing on the full reduction and taking their floating rate down to 5.45%.

Floating Prior rate New rate Change effective from
  % % % for existing clients
5.74 5.64 -0.10 March 29, 2016
ASB 5.75 5.55 -0.20 March 24, 2016
Kiwibank 5.65 5.45 -0.20 March 24, 2016
Westpac 5.85 5.75 -0.10 March 29, 2016
5.70 5.45 -0.25 March 11, 2016
HSBC 6.10      
ICBC 5.60      
HSBC 5.74      

Westpac has also reduced some key call accounts, by as much as -0.25%.

Today they also reduced most term deposit rates by between -5 and -15 bps.

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Suddenly we don't have any NZ banks?
Or has the penny finally dropped.

So Westpac cut their floating mortgage rate by 10 bps, but cut their bonus saver rate by 25 bps?

And Westpac's floating mortgage rate after the cut is worse than TSB, SBS and Kiwibank, who haven't even announced a cut to their rates.

Greedy greedy greedy

If there's far better pricing in the fixed space for customers, does it really matter?
Apart from those who require a liquid position there wouldn't be much activity in the floating arena anyway.

What about those on revolving credit?

About a quarter of mortgages are in the gloating space currently

4 billion profit last year,we aim to match or better that figure this year
Signed C E O s of Aussie owned banks.Spot you cobbers.

This will mean the RBNZ will need to make another cut soon

If RBNZ unexpectedly raise the OCR by 25 bps next time, will Westpac and ANZ increase their floating rates by 10 or 25 bps?

This just in, water is wet. More news at 10.
Are we surprised that banks (particularly the Aussie ones) are blood thirsty after cash in such a manner they will withhold lending cuts but take them in full from savings rates in order to maximise profits for shareholders (mainly in Aussie) ???
If you don't like it make sure you bank with a New Zealand owned bank; TSB, Kiwi Bank, The Cooperative Bank, SBS etc etc otherwise shut up?

Life-long ASB customer here - first time I've actually considered switching to NZ owned.

Waiting to see what ASB does then will consider switching to Co-Op. Good rates, good internet banking website and good app for phone.

Good thinking. I see Co-Op applied the full cut to its floating rate & Kiwi Bank has done .2% however that brings it inline with Co-Op's rate.

some shareholders are kiwis, a lot of kiwisaver funds will also hold them
and we are quite happy they look after us before the indebted

Maybe we ought to be concentrating on a new type of banking for NZ.....a system that is local....ensures depositors aren't left in the cold in the current unsecured sphere.
What would be the best alternative to current models? And would a new model require its own legislation?

All mortgage instruments household, business, agriculture etc stay within the confines of the new bank.......would that satisfy all parties?

A new system would need to consider how to get a better return to depositors while ensuring those on the borrowing side are not pushed over any cliffs.....depositors money is no good to anyone if the user of those funds is not fairly and equably treated......surely some kind of balance between the depositors funds and the creating money out of thin air and lending rates can be in some way shared out with the reward between depositor and borrower being more evenly spread.......allowing for more of the profits to be returned to the people underwriting the money creation process.

An example could go something like:
I deposit a $100k in newly formed banking type entity.
My $100K then creates e.g. $400K (money created out of thin air).
So total lending achievable is $500k

A borrower comes along needing $500k

The depositor receives interest on his/her $100k plus some of the $400k created money.
The borrower pays interest on full amount but there could be a slightly lower rate charged on some of that created money.

A small amount of the total interest charged is kept for the running costs etc associated with the new entity.

Cut out the middleman
Inbuilt security over depositors funds.
Depositors get paid for their risk of exposure to created money by receiving some of the interest on it.
All mortgage instruments held.

Sounding fairly similar to P2P lending? With the interest rate being earned effectively giving you some of the "400k" created through the leverage effect.

Don't think you would be able to apportion some interest on the "created" money on a loan/deposit basis - it would all have to be factored into the initial saving/investment rate.
Similar to P2P.

I can't see why there couldn't be a e.g. 75% /25% ratio on reflect the money creation portion. In fact I think what I am suggesting is pretty much upfront and educates people fully to how money actually comes into existence.....and a ratio situation is actually a more honest approach.

I have listened to all the complaints on and then tried to formulate something that could possibly resolve those issues......this is off the top of my head stuff....with emphasis on being fair on borrowers and lenders.....note my structure was trying to feed all income derived back to the people who deposited funds while giving some of the created money income at a lower rate to those putting the capital to use.....a sort of win/win creaming off at the top......
a sort of cooperative structure rather than P2P......but please feel free to offer solutions/advice and alternatives to the status quo because I'm thinking that a new system is really important.

Does P2P hold mortgage instruments?

Not sure about any others

I guess the main problem is that the leverage effect depends on the portion of deposit retained as capital (10% retained = 10x multiplier). This may change over the life of the entity, or even the life of the loan, so would the interest earned on the leverage effect portion need to change over the life?

Sounds like its a bit too complex to probably happen - but I understand the idea and in theory is good.

That 0.10 reduction takes my revolving rate down to 4.95% with Westpac. Can't complain about that.

I have been with Westpac since it was Canterbury Savings Bank in the 70's, Trustbank, Westpac Trust etc. We have numerous investment properties and have become increasingly disappointed in recent years with the impersonal relationship that Wespac now offers.
This, coupled with the lack of reactiveness to the market has made me start to look seriously at New Zealand owned alternatives.
Unfortunately I doubt very much whether they will even notice (or care) that I've gone.

Difference is the NZ owned banks are minnows and fund almost entirely off the local deposit market for their small requirements. The Aussie banks fund the bulk of everything in NZ (and investment multiple billions of their shareholders capital into NZ to do so - expect them not to earn some few billions of profits in return for that?) and can not access all the required funding to do that off a local market from NZers who borrow far more on average than they save. So they fund a quarter or so offshore and in times like this that cost goes up and some or all gets past on

Sure lets all run to NZ banks who firstly have no capital to fund their businesses to handle that, and secondly will need to go to offshore markets if they did and pay the cost to do that, which they will then be passed on to NZers - problems being it will be a bigger cost because they will not have the same credit rating offshore to access it at the same margins. It would be nice to see some informed comment rather than parochial populist clap trap

Rome wasn't built in a day Grant.

I think what we have got from Kiwi Bank and ANZ is pretty predictable.
I bank with two big banks and one local one. When you need mortgage money and pick over what they offer across the table as apposed to in the media I have found the likes of the big banks have the sharpest deals. Also they have a full range of services that I need. I wish writers would stop the heart thumping. Just go and work for your money by investing in property and working 7 days a week to look after your tenants. The rewards will not be handed to you by politicians nor journalists.

Time for a Super Tax on Super Profits.
Banks have been warned in Australia to pass on OCR cuts by the RBA, if they aren't passed on the RBA will investigate any bank not passing on RBA OCR cuts.
So what if they don't pass it on in NZ, what's the consequence to the Bank????

So does this mean that the reserve bank no longer has an inflation adjustment tool to use (OCR)?