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Monetary Policy Pass-Through to Mortgage Rates

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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.

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  • Severin Bernhard & James Graham & Shaun Markham, 2021. "Monetary Policy Pass-Through to Mortgage Rates," Reserve Bank of New Zealand Analytical Notes series AN2021/07, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbans:2021/07
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    File URL: https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytical%20notes/2022/AN2022-01-technical-appendix.pdf?revision=2bcca84a-8f59-41a9-9fdd-f24601f1b1dc
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