Mortgage Rates

PHOTO: Mortgage Rates. Photo: 123RF

The Reserve Bank is considering a new funding for lending programme to encourage lower interest rates on loans for New Zealanders.

The scheme is part of a number of measures designed to protect the New Zealand economy from the effects of the Covid-19 pandemic.

At the six-weekly review yesterday the Reserve Bank left its official cash rate (OCR) unchanged at a record low 0.25 percent.

Its Monetary Policy Committee also noted the Funding for Lending Programme (FLP) would be ready before the end of this calendar year.

“Funding for lending is basically cheap loans for banks,” Westpac NZ chief economist Dominick Stephens told Morning Report.

To bring in the money they then lend to customers, banks pay about 1 percent over the OCR rate to people with term deposits or on the wholesale market, he said.

“The Reserve Bank would lend to banks more cheaply than that – say at the OCR.

“If banks are bringing money in more cheaply they can bring mortgage rates down.”