Modelling New Zealand mortgage interest rates?

Enzo Cassino
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Enzo Cassino: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

No AN2012/10, Reserve Bank of New Zealand Analytical Notes series from Reserve Bank of New Zealand

Abstract: Determinants of New Zealand mortgage interest rates are examined, including how changes in the OCR are transmitted through the wholesale cost of funds to mortgage rates. Mortgage rates are modelled as a mark-up over banks' marginal funding cost. The results suggest that banks frequently diverge from a simple marginal cost-pricing model. Marginal cost pricing of mortgages appears to hold only in the long run. Floating mortgage rates and short-term fixed rates are closest to showing a full pass-through of changes in marginal costs.

Pages: 14 p.
Date: 2012-11
New Economics Papers: this item is included in nep-ure
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