Key Facts:

  • Banks in New Zealand, including ANZ, have recently announced mortgage rate increases.
  • David Cunningham, a former banker and current mortgage broker, accuses the banks of increasing their profit margins with these rate rises.
  • Cunningham questions whether the increases in wholesale swap rates and other underlying costs of funds are sufficient to explain the retail rate rises.
  • He presents a chart comparing one-year home loan rates to one-year wholesale interest rates, showing that while the wholesale rate has barely moved, the banks have raised their home loan rates by about 0.5%.
  • ANZ defends its pricing strategy, stating that interest rates are influenced by various factors and that shorter time frames may not accurately reflect the overall picture.

Article Summary:

A former banker and current mortgage broker in New Zealand, David Cunningham, has criticized the recent wave of mortgage rate increases by banks, accusing them of increasing their profit margins. Despite the easing inflationary pressures and the Reserve Bank’s decision to hold off on further interest rate hikes, banks have raised their fixed home loan rates, leading Cunningham to question whether the underlying costs of funds justify these increases. He presents a chart showing the comparison between one-year home loan rates and one-year wholesale interest rates, highlighting that the latter has barely moved while the former has risen by 0.5%. Cunningham argues that this is equivalent to a 50-point OCR (Official Cash Rate) hike.

ANZ, one of the banks that raised its rates, defends its pricing strategy, stating that interest rates are influenced by various factors and that looking at shorter time frames may not provide an accurate picture. The bank explains that it constantly reviews its deposit rates to manage interest margins and product pricing, considering factors such as the impact on customers, the underlying cost of funds, and competitor activity.

In conclusion, mortgage broker David Cunningham criticizes banks for increasing mortgage rates, suggesting that they are taking advantage of the situation to improve their profit margins. He questions the justification for these rate rises in relation to underlying costs. ANZ defends its pricing decisions, emphasizing that interest rates are influenced by multiple factors and that short-term comparisons may not accurately reflect the overall picture.

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