Monetary Policy Pass-Through to Mortgage Rates
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.