Banks not taking up Reserve Bank’s rate

AUCKLAND: Banks have so far been slow to take up the Reserve Bank’s cheap lending offer with the country’s largest bank, ANZ, yet to tap into the Funding for Lending programme.

The programme opened to banks on December 7 and allows them to borrow at the official cash rate (OCR) — currently at 0.25% — for a period of three years.

But so far, just $1.04 billion has been drawn down — $40 million on December 11 and $1 billion on December 21.

To put that in context, banks did $9 billion in mortgage lending in November alone last year.

Kelvin Davidson, a senior economist at CoreLogic, described it as a slow start.

‘‘Certainly you would call it slow to get going.

‘‘I wouldn’t say that was something to be concerned about — just they haven’t needed it so far. That is not to say they won’t use it.’’

Mr Davidson said the banks could tap into the facility once other funding rolled off over the next three to six months and it sought the programme as a cheaper option.

Cameron Bagrie, an independent economist at Bagrie Economics, said Funding For Lending was a financial crisis tool without a financial crisis.

‘‘I do not understand why is it even there. It is not as if banks have problems sourcing funding, nor interest rates need to be even lower for a red hot property market.

‘‘Banks have oodles of cheap funding already and deposits continue to grow strongly. Term deposit balances might be down but transaction and savings balances are up sharply and the funding costs on those are basically zero.’’

The Reserve Bank would not say which banks have drawn down on the facility, which is intended to help lower retail lending rates.

The RBNZ said it was unable to provide further details due to confidentiality.

Queries to major banks found most reluctant to say whether they had used the scheme. — The New Zealand Herald