Monetary Policy Pass-Through to Mortgage Rates

Severin Bernhard, James Graham and Shaun Markham
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Shaun Markham: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

No AN2021/07, Reserve Bank of New Zealand Analytical Notes series from Reserve Bank of New Zealand

Abstract: This Note examines how monetary policy passes through to mortgage interest rates across the economy and at the individual bank level in the short and medium-term. A 1% change in the Official Cash Rate (OCR) will move mortgage rates by 0.34% within 1 month. The pass-through increases over time, with the peak impact on mortgage rates occurring about 6 months after the change in the OCR. There are significant differences in monetary policy pass-through to mortgage rates across banks. We briefly investigate why monetary policy pass-through to mortgage rates differs across banks. Some of the reasons we explore include: retail funding share, foreign funding share, and size of bank.

Pages: 10 p.
Date: 2021-08
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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbans:2021/07

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