More banks pass on OCR increase

BNZ, ASB and Kiwibank have become the latest to move on interest rates, after the official cash rate was increased on Wednesday.The rate lifted 25 basis points.Westpac and ANZ increased interest rates on Wednesday afternoon.On Thursday, Kiwibank said it was increasing its variable home loan rate and offfset variable rate by 25 basis points, to 6.25 percent.Its revolving loan rate increases from 6.05 percent to 6.3 percent.It is also passing on increases to savers, but to a lesser degree.Its 90-day and 32-day notice saver rates lift by 15 basis points, to 2.75 percent and 2.2 percent, respectively.Its standard online call, PIE online call and business online call interest rates are also lifting by 15 basis points.BNZ is passing on the full 25 basis point increase in the OCR to its variable housing rates, effective 17 September.ASB said it too was increasing its variable home loan rate by the full 25 basis points, its Savings Plus product by the same margin and its Headstart rate by 10 basis points.In its monetary policy statement, the Reserve Bank criticised banks for not passing on increases to term deposit rates.It said the monetary policy committee had noted a "more limited pass through of higher wholesale interest rates to term deposit rates", which made funding cheaper for banks."A greater pass through to deposit rates would be more consistent with the desired stance and transmission of monetary policy."Infometrics principal economist Brad Olsen told RNZ on Wednesday it was fair criticism from the Reserve Bank."There hasn't been quite as much of a lift in term deposits as wholesale interest rates have increased but retail mortgage rates of course have moved up faster than term deposits."Even some slim difference between passing on interest rate increases to retail mortgage rates versus term deposits can start to create some larger margins for banks - and what the Reserve Bank is saying here is that, if both retail mortgage rates and term deposits were seeing more equal pass-through, the signalling from interest rates would be more balanced."Higher mortgage rates and other lending rates suggest that everyone should spend and invest relatively less than they did before, and higher savings rates, like term deposits, also send a signal that you'll get a bit more if you save rather than spend/invest. That's the transmission the Reserve Bank is talking about."Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money.