5 May 2009

Floating rates in Australia lower than in NZ

4:29 pm on 5 May 2009

Australian-owned banks are charging their domestic customers almost 1% less for floating mortgage rates than those in New Zealand, despite a lower Official Cash Rate in New Zealand.

A drop or rise in the OCR has a direct influence on floating mortage rates.

Westpac, ANZ National, the BNZ and the ASB are offering customers in Australia an average of 5.75% for a floating mortgage. In New Zealand the average is 6.43%.

Investment strategist Jonathan Ericson says the higher rate here is because of a lack of liquidity in the economy to service high borrowing demands.

The latest cut to the OCR by the Reserve Bank of New Zealand on 30 April, took it to 2.5%. The Reserve Bank of Australia earlier reduced its equivalent rate to 3% on 7 April.

Auckland University Banking specialist Professor David Mayes says banks in New Zealand should be thinking about dropping rates, given a strong indication from the Reserve Bank that the OCR will remain low for some time.

But he says it's hard to know what internal influences may be forcing banks to keep rates higher in New Zealand than in Australia.