Whilst it may monitor banks' OCR pass through data, the FMA acknowledges banks have no legal obligation to pass on changes as most appear to pad floating mortgage rate margins

Although the Financial Markets Authority (FMA) monitors and publishes how much of Official Cash Rate (OCR) cuts banks pass through to mortgage rates, it acknowledges banks have no legal obligation to pass on OCR changes and nor is the FMA a pricing regulator.

These comments come from Michael Hewes, the FMA's Director of Deposit Taking, Insurance and Advice, after interest.co.nz asked about the FMA's monitoring of banks' OCR pass through transparency.

The FMA publishes detail of this on its website, something it pledged to do to when appearing before Parliament's banking inquiry last year, when FMA CEO Samantha Barrass told MPs; “I can assure you that the time taken to pass on changes in OCR to banks’ customers will be something that we will be paying very close attention to.” 

Spotlight on floating mortgage rates

Mark Wilkshire, CEO of The Co-operative Bank, which has a significantly lower floating mortgage rate than rivals, has questioned why this is the case. He says Co-op's 4.99% rate provides "a reasonable margin."

Co-op Bank's carded, or advertised, floating mortgage rate is 4.99%. That's down 341 basis points from 8.40% just before the Reserve Bank began cutting the OCR in August 2024. Between August 2024 and November last year, the Reserve Bank reduced the OCR by 325 basis points to 2.25%.

However, as Wilkshire notes, other banks haven't passed on the full reduction to their floating mortgage rates. 

ANZ NZ's floating rate is down 270 basis points to 5.79% today, albeit the bank says it also cut 15 basis points in anticipation of the OCR moving before it was lowered in August 2024. ASB's is down 285 basis points to 5.79%, BNZ's is down 285 basis points to 5.84%, Kiwibank's is down 275 basis points to 5.75%, and Westpac NZ's is down 275 basis points to 5.89%.

Among other banks, SBS Bank's is down 290 basis points to 5.84%, TSB's is down 285 basis points to 5.79%, Bank of China's is down 239 basis points to 5.10%, China Construction Bank's is down 289 basis points to 5.25%, and ICBC's is down 246 basis points to 5.39%. (See all bank mortgage rates here).

Wilkshire says while people often talk about only 11% of bank dollars being on floating rates, that's not looking at it from the customer's perspective. He says about a third of mortgage customers have some money on a floating rate, and in times of uncertainty floating rates can be particularly attractive to borrowers. 

'No legal obligation to pass on OCR changes'

Hewes says the FMA began publishing OCR pass through data in August 2025 with the aim of improving transparency and supporting customers to make informed decisions.

"[But] there is no legal obligation to pass on OCR changes and the FMA is not a pricing regulator, so cannot determine the rates that a bank must offer its consumers. As a conduct regulator, our role is to ensure banks are treating their customers fairly under the Conduct of Financial Institutions (CoFI) regime, which the FMA oversees."

"We intend to continue publishing this data over time and build a data series to support our engagement with banks on how they meet their CoFI obligations," says Hewes.

The FMA's OCR pass through monitoring is one of several areas emerging from the parliamentary banking inquiry where moral suasion is being used to encourage behavioural change.

The FMA also plans to review transaction accounts, which will see it engage with banks on how they decide transaction accounts are suitable for customers and that customers understand the costs and benefits of these accounts, Hewes adds.

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