Bank fixed-lending rates 'reasonable', floating rates could fall

In a report on bank funding costs and margins, the Reserve Bank of New Zealand (RBNZ) concludes that a large part of its cuts to the official cash rate have been passed on to households and businesses.

Still, the spreads between marginal funding costs and floating mortgage rates have widened in recent months to "historically high levels."

The RBNZ said it is continuing to have discussions with lenders about their funding and pricing.

"On balance, we believe the pricing of banks' fixed-rate lending products is reasonable given the underlying cost of funds and taking into account the margins typically earned on these products over time," the RBNZ said in a statement today.