The Reserve Bank lifted the official cash rate by 25 basis points to 2.75 percent on 2 September, and within a day the country’s biggest banks had handed every point of it to people with floating mortgages. Savers waited longer and got a fraction of it.
ANZ moved first, taking its standard floating home loan rate to 6.29 percent. ASB matched at 6.29 percent, BNZ went to 6.34 percent and Westpac to 6.39 percent, each passing on the full 25 basis points, according to interest.co.nz’s tracking of the repricing. Kiwibank also lifted its base variable rate by the full amount.
The savings side looked nothing like that. ANZ added 25 basis points to the bonus portion of its Serious Saver, giving a potential rate of 2.05 percent, but the base rate stayed at 0.05 percent and the change does not take effect until 1 October. Its Online Call account went up five basis points, to 0.50 percent, from 9 September. Kiwibank added 15 basis points to its savings accounts. ASB raised its SavingsPlus rate by 25 basis points. BNZ announced no savings change at all when it lifted mortgage rates.
Reserve Bank Assistant Governor Karen Silk told interest.co.nz on Friday that the gap was obvious. “We’re definitely not seeing the same level of pass through. So you even saw it yesterday [Thursday] with the banks increasing the floating mortgage rate by 25 basis points. But then you look at what actually happened to the deposit rates, there were some increases but they were like five and 10 basis points, not 25 basis points,” she said.
Silk put part of it down to how much cash the banks already hold and how little competition there is for new deposits, and part of it down to savers themselves. “There’s another part of it which is, there’s an inertia that exists in this market, a depositor inertia … There’s still [a] significant amount of money that’s sitting in transactional accounts, which are very low earning accounts versus term deposits,” she said. “It doesn’t feel like there’s a lot of shopping around. And people have the ability, they’ve got choice, so you can shop around to see where you can get the best rate.”
The Monetary Policy Committee wrote the same thing into the September Monetary Policy Statement. “The Committee noted a more limited pass through of higher wholesale interest rates to term deposit rates, which is lowering the cost of new funding for banks. A greater pass through to deposit rates would be more consistent with the desired stance and transmission of monetary policy,” the statement says.
The same document puts a number on it. The gap between the six month term deposit rate and the six month wholesale interest rate has fallen by around 35 basis points since the May statement, and by around 75 basis points from its peak in October 2025. Banks are now raising money from depositors more cheaply, relative to what it costs them in wholesale markets, than they were a year ago, and the Reserve Bank’s own estimate of their weighted average cost of new funding has fallen because of it.
What that leaves an ordinary saver is easy enough to check. On interest.co.nz’s term deposit tables this weekend, six month rates at ANZ, ASB and BNZ all sat at 3.55 percent, Kiwibank at 3.50 percent and Westpac at 3.45 percent, while Bank of China offered 3.75 percent over the same term. On the everyday accounts where most household money actually sits, ASB’s Savings On Call paid 0.25 percent, ANZ’s online savings account 0.50 percent and BNZ’s Rapid Save 2.00 percent. Heartland’s 90 day Notice Saver paid 3.10 percent and Kiwibank’s 90 day Notice Saver 2.75 percent, which is exactly the cash rate.
Run tax and inflation through those numbers and it gets bleaker. A saver on the 33 percent resident withholding tax rate who locks money into a six month term deposit at 3.55 percent keeps about 2.38 percent after tax. Annual inflation was 4.1 percent in the year to the June 2026 quarter. That is a real loss of roughly 1.7 percentage points on money the Reserve Bank is actively trying to encourage people to save. In an on call account paying 0.50 percent the after tax return is about 0.34 percent.
Silk was asked directly whether banks were padding their margins. “Certainly when you’re in a situation where you have less pass through to deposits, which forms a really significant part of their funding … roughly 70 odd percent, if you think of a bank’s balance sheet today, as being funded out of deposits versus wholesale funding and or capital,” she said. “And so the same level of pass through is not going through there as it is into their major asset class, which at the moment is housing loans, then you do see that widening of margin.”
She then put the banks on the horns of it. “So you’ve either got to see [an] increase in savings rates, being the transfer of monetary policy into savings rates as well, or … you would argue that actually there’s no need for them to increase mortgage rates because they’ve already got a reasonably good net interest margin sitting there. So if you’re not going to pass it into your cost of funding, why would you pass it into your revenue generating side?”
Her wider point is that a rate rise is meant to work through two channels at once. “It’s not just about the concept of curbing demand through the borrowing channel. It’s also about incentivising people to save more. So, the incentivisation needs that same pass through to happen into deposit rates as well,” she said.
The next decision is a monetary policy review on 28 October rather than a full statement. Market pricing quoted in the September statement implies the cash rate reaching around 3 percent by the end of the year, with inflation forecast back inside the 1 to 3 percent target band by the middle of 2027. Annual inflation excluding vehicle fuels was already down to 2.9 percent in the June quarter. You can follow every move and the dates behind them on our OCR tracker. Until then the arithmetic sits with the depositor, and the gap between the worst everyday account and the best notice saver on the market is close to three full percentage points.
Have you moved your savings since the cash rate started rising again, or is your money still sitting where it has always sat? Tell us in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
Leave a Reply