CBA boss Matt Comyn said “pricing conduct is difficult to reconcile” in the New Zealand mortgage marketAs Australia’s largest bank unveiled its record $10.2 billion full-year profit, Comyn warned that competition in the domestic home loan market remained intense, and that was putting pressure on lending margins.
But some NZ bankers have pointed out that banking conditions across the Tasman are not nearly as bleak as Comyn and Docherty would have you believe.Certainly, the sluggish demand for home loans has put downward pressure on mortgage margins. But, at the same time, the big banks have earned handsome profits from the steep rise in NZ interest rates, given that they’re sitting on tens of billions of dollars of non-interest bearing deposits.
He argues that “home loan margins have shrunk – perhaps some small consolation for Kiwi mortgage borrowers – but the banks are more than making up for it in the deposit space.” “On funds held in Kiwi transaction accounts – about $NZ40 billion – the bank margin has lifted by roughly 5.5 per cent,” he writes.
Cunningham also points out that in July, the CBA-owned ASB hiked its fixed rate home loans by about 25 basis points, even though the last rate hike by the RBNZ had been in May.The ASB’s rate hike was quickly followed by other major lenders, suggesting the big banks are boosting margins to compensate for slower lending growth.
At present, there are around $NZ313 billion of fixed rate home loans, compared with only $NZ36 billion of variable rate home loans.