BRIEF-RBNZ Says Mortgage Rates Move With Official Interest Rates, But It Takes Time

Reserve Bank of New Zealand: * MORTGAGE RATES MOVE WITH OFFICIAL INTEREST RATES, BUT IT TAKES TIME

* ANALYTICAL NOTE SHOWS THAT 1% CHANGE IN OFFICIAL CASH RATE TYPICALLY MOVES AVERAGE TWO-YEAR MORTGAGE RATES BY 0.34% WITHIN ONE MONTH. * PASS-THROUGH FROM CHANGES IN MONETARY POLICY INCREASES OVER TIME, WITH PEAK IMPACT ON MORTGAGE RATES ABOUT 6 MONTHS AFTER CHANGE IN OCR

* HOUSEHOLD BORROWING IN FORM OF MORTGAGES MAKES UP AROUND 43% OF COMMERCIAL BANK BALANCE SHEETS, A LARGE PART OF ALL BORROWING IN NEW ZEALAND * SMALL BANKS SEEM TO PASS ON CHANGES IN OCR MORE THAN LARGE BANKS

* RESEARCH ALSO FOUND PRELIMINARY EVIDENCE THAT SOME BANKS PASS ON MORE OF THE CHANGE IN OFFICIAL INTEREST RATES THAN OTHERS * IN RESEARCH, FIND THAT CONTEMPORANEOUS OCR PASS-THROUGH TO 2-YEAR MORTGAGE RATES IS AROUND ONETHIRD

* EFFECT OF CHANGE IN OCR ON PASS-THROUGH TO 2-YEAR MORTGAGE RATES INCREASES OVER MEDIUM-TERM, WHERE PEAK EFFECTS OCCUR AFTER 6-7 MONTHS Further company coverage:

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