Federated Farmers pushes for inquiry into why farmers are slapped with higher interest rates than homeowners

Farmers' satisfaction with their bank is at record lows, a new survey has found, renewing calls for an independent inquiry into rural banking.

The latest Federated Farmers' Banking Survey conducted in November found 25.8 percent of respondents felt they'd come under "undue pressure" from their bank over the previous six months.

Although 55.6 percent remain satisfied or very satisfied with their banking relationship, this was down 0.7 percent from the last survey in May.

Federated Farmers domestic commerce and competition spokesperson Richard McIntyre said the results add weight the groups call for an independent inquiry into rural banking.

"It's a real concern that more than a quarter of farmers have felt like they've come under undue pressure from their bank," McIntyre said.

"Farmers are already under huge financial and mental pressure with high costs, falling commodity prices and extreme weather events. As if that wasn’t bad enough, now they also feel like they're getting a raw deal from their bank."

In September, Federated Farmers called on the next Government to carry out an independent inquiry to find if higher interest rates for farmers were increasing banks' profitability or cross-subsidising a much more competitive market for home loans.

McIntyre said many farmers commented that their dissatisfaction was due to interest rates being too high – and much higher than those for residential borrowers. He said average mortgage interest rate in the survey was 8.26 percent while the average overdraft interest rate 10.52 percent in November.

"The banks seem to be charging far higher interest rates for farm lending than for home loans, which is raising eyebrows in farming households across the country," McIntyre said.

"Farmers deserve to know why farm lending rates are so much higher than the rate on offer for things like urban home loans."

The survey found 44.3 percent of farmers felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of pressure. This is up 0.7 percent from May 2023.

The survey did find an improvement in perceptions about communication, with just under 57 percent saying their bank communications had been very good or good. However, the concern about high interest rates overwhelmed any "warm fuzzy feelings" about the quality of communication, McIntyre added.

With families farming through tough times, Federated Farmers are encouraging farmers to ensure they are maintaining detailed and up-to-date budgets.

Only 18 percent of farmers have budgets for next season, the survey found.

"Although there's still a lot of uncertainty about next year, we encourage farmers to plan for it too," McIntyre said.