While the banks have been silent, BNZ did put out a statement confirming it would not cut its rates. Westpac followed late on Thursday.
“We are not making any changes to interest rates today," BNZ acting director of retail and marketing David Bullock said.
"It’s a good time to remind people that interest rates aren’t directly or solely linked to the OCR. Banks get their ability to lend from a few sources, most of which are getting more expensive and putting pressure on margins.
"One source is local deposits, and at the moment there are more people wanting home loans than there are people saving. So to encourage and attract more deposits (people’s savings and terms deposits) we need to pay a sharper return to savers. And we still need overseas funds to fill the gap – and the cost of these remains volatile.
"All those factors considered, it’s still important to remember that today’s interest rates for home loans are still some of the sharpest in decades and still a good time for people with home loans to look at ways to pay off their loans faster,” he said in a statement.
Westpac took a similar line saying: "There will be no change to Westpac’s mortgage rates following the Reserve Banks New Zealand’s cut in the Official Cash Rate today. On-going rises in the cost of offshore funding provide no opportunity to lower home loan rates at this time."
General Manager Consumer Bank and Wealth, Simon Power, said the consistent low flow of local deposits was forcing banks to look offshore for funds.
“The OCR is just one factor in assessing interest rates. Its importance is diminished when banks need to use offshore funds to cover the gap left by a lack of local deposits,” he said.
“In this situation and in a period of global uncertainty, a number of factors become more influential than the OCR. These include the increased cost and lack of supply in the local deposit market, exchange rate risk and the increased capital requirements for investors.”
“With historic low interest rates NZ home owners are taking the opportunity to pay down mortgages faster and reduce debt levels. Many home loan customers have done that and are more than three months ahead on repayments. This deleveraging is prudent and a positive step for the economy and New Zealanders.”
