Mortgage holders question banks on rate cuts

Wednesday 23 March 2011

Mortgage holders are questioning why their banks are making them wait between two and three-and-a-half weeks to pass on Reserve Bank governor Alan Bollard's cut in official interest rates to their floating home loan rates.

By The Landlord

Bollard cut the official cash rate (OCR) from 3% to 2.5% on March 10.

Kiwibank passed on Bollard's cut to new customers taking on floating-rate mortgages immediately but its existing customers with floating rate mortgages have to wait until March 28.

The four major Australian-owned banks took between one and four days to pass on the cut for new customers but their existing customers have to wait until March 24, in the case of BNZ, and up to April 4, in the case of ASB Bank.

One site reader, who describes herself as a disgruntled ANZ Bank customer, questions whether the banks are taking the opportunity to profiteer at their customers' expense.

ANZ passed on the cut to new customers on March 12 but won't pass on the cut to existing customers until March 28. Interestingly, the ANZ-owned National Bank didn't pass it on to new customers until March 14 and its existing customers have to wait until March 29.

"The National Bank and ANZ operate on two different systems with differing system constraints around rate-change timings," says ANZ National spokeswoman Lyn Holland.

Another reader says he emailed his bank manager as to why his bank, Westpac, wasn't passing on the cut until March 31. "He never replied - probably too embarrassed. Now he has his out-of-office on."

Yet another says: "Banks should drop floating rates immediately the change is announced. The floating rate should be just that - floating."

One reader says: "I reckon its just a money grab. They know that no one will bother refinancing if they are getting the lower rate in about a month's time."

All the banks say it's a matter of the constraints of their systems and the requirement to give their customers notice. Customers experience exactly the same delays where the OCR rises, they says.

BNZ spokeswoman Emily Davies' response is typical: "The CCCFA (Credit Contracts and Consumer Finance Act 2003) regulations require existing customers to be notified of any changes to their repayments within five working days of the change.

"While we can put new customers on the changed rate straight away, we need to allow a reasonable timeframe to inform existing customers. Our process is identical for any mortgage rate change," Davies says.

Which is unlikely to satisfy the complainers: "Unfortunately, it's all connected with legal issues and the banks like too hide behind them," says one site reader.

 

 
New Customers
Existing cust'rs
Rate
Old rate
ASB
March 11
April 4
5.75%
6.30%
ANZ
March 12
March 28
5.74%
6.20%
NBNZ
March 14
March 29
5.74%
6.24%
BNZ Total Money
March 11
March 24
5.59%
6.10%
Westpac
March 11
March 31
6.24%
6.74%
Kiwibank
March 10
March 28
5.65%
6.20%

Comments from our readers

On 24 March 2011 at 9:17 am poppy said:
I am with National and yes have complained about this delay as i'm sure that when the rate went up last year they applied it immediately! I have advised I want the advertised floating rate - which I'm sure they have to give me otherwise it is false marketing/advertising isn't it?
On 24 March 2011 at 10:04 am Alan said:
Looks to me that Westpac still wants to gouge its customers- its new rate barely matched any of the other banks old rates if what you have listed is correct?
On 24 March 2011 at 10:21 am Patrick said:
I don't mind that rates are not passed on straight away. Given floating rates are pretty much at a low, I won't be complaining when there's a delay in rate rises. Do we really want the banks to implement a change going forward?
On 24 March 2011 at 11:50 am Jarrod said:
The same delays occur when rates increase so people shouldnt complain
On 25 March 2011 at 9:21 pm Karen Williamson said:
We are Sovereign customers and have been advised our interest rate will decrease on 18 APRIL (5.75%).
On 27 March 2011 at 10:48 am Jason said:
Perhaps if this was a balanced article it would ask how long it takes to adjust for rate increases not just rate decreases. That would show if banks were "profiteering" if the notice period was different.
Commenting is closed

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