Banks may hold off rate rises

Banks may not pass on the full amount of the first official cash rate rise to floating mortgage rate customers, according to a Massey University banking expert.

David Tripe said there was a certain amount of slack in floating rates which could give the banks some wriggle room.

"Funding costs for the banks have been sneaking down and banks haven't adjusted their floating rates down. It would not be impossible that banks didn't increase the floating rate by the full official cash rate change on the basis there is some slack there."

But he said it would also depend on market dynamics and what banks were doing to compete with each other.

Bank economists are predicting the official cash rate to go up by around 125 basis points this year which would push the official cash rate to 3.75 per cent from 2.5 per cent.

Westpac economist Michael Gordon said he couldn't predict whether banks would continue to keep the same margin between the OCR and floating rates as the official rate rose.

"Floating rates are most likely to reflect the OCR but margins settle where competition dictates."

- Tamsyn Parker of the New Zealand Herald

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