Talk Money: March 7, 2016
The Reserve Bank reviews the Official Cash Rate on Thursday.
Few economists expect a rate cut, they believe that is more likely to happen towards the middle of the year.
If there is no cut to the OCR we might see some interest rates rise. Even if there is a rate cut on Thursday we may not see the commercial banks pass on the full cut to their borrowers.
Some bank-to-bank lending rates are rising offshore. It is because of nervousness about bank profits. The increased nervousness means that when the banks lend each other money they are pricing in some added risk.
New Zealand's banks get as much as 40 percent of their mortgage money from offshore.
So if they have to pay more to borrow money offshore it means their costs go up. They can pass on the added costs to their customers, or they can allow their profit margins to shrink.