13 May 2009

Reserve Bank renews plea for interest rate cuts

3:41 pm on 13 May 2009

The Reserve Bank has again called on retail banks to lower some mortgage interest rates.

Issuing the bank's six-monthly financial stability review on Wednesday, deputy governor Grant Spencer highlighted floating rates as being of particular concern.

He says there is a considerably higher margin on floating rate mortgages than on most fixed rate mortgages so there is probably scope for more competition in the floating rate segment of the mortgage market.

He says banks' higher margins reflect the higher risk of lending to borrowers during the recession.

But he says the margins the banks are making on floating mortgages are as high as he can ever remember them.

Massey University professor of banking David Tripe says the Reserve Bank could take more concrete steps to lower floating mortgage rates.

The Official Cash Rate was lowered to 2.5% from 3% on 30 April.