The Reserve Bank has cut the official cash rate (OCR) to a new all time low, but the banks seem unlikely to pass any saving to borrowers.
On Thursday the central bank carried out its long signalled plan to lower the benchmark, dropping it 25 basis points to 1.75 per cent.
Despite being motivated by a belief from the Reserve Bank that the dollar needs to be weakened, the markets reacted by pushing up the kiwi dollar by around half a cent against the US dollar.
While the OCR is meant to have a strong influence on the interest rates charged on mortgages and the returns paid on deposits, there is no sign the latest cut will be passed on.
The last time the OCR was cut back in August, most of the banks passed on only a fraction of the cuts on floating rate mortgages, while the interest rates offered on deposits rose.
Within minutes of the Reserve Bank's decision to cut interest rates the BNZ contacted media to warn that none of the cuts would be reflected in the rates it offered customers.
"We are not making any changes to interest rates today and it's a good time to remind people that interest rates aren't directly or solely linked to the OCR," BNZ's acting director of retail and marketing David Bullock said in a statement.
Westpac confirmed it too was making no change to its mortgage rates.
Simon Power, Westpac's general manager of consumer bank and wealth said the OCR was only one factor in assessing what the bank should charge.
"Its importance is diminished when banks need to use offshore funds to cover the gap left by a lack of local deposits," Power, a former Minister of Commerce, said in a statement.
ANZ and ASB have not announced changes to mortgage rates.
Reserve Bank governor Graeme Wheeler said the decision on whether to reduce retail rates was "very much up to the banks" but noted increased funding costs.
"If you look at the banks' funding situation at present, they've got lending growth rates exceeding their deposit growth, and so they're having to move to offshore markets to get some of their funding and that's more expensive funding for them," Wheeler said.
"You're starting to see some upward pressure on deposit rates and you're also starting to see some increase on mortgage rates, so it's possible that we may not see a lot of adjustment in terms of lending rates. Possibly there may be some [adjustment] on floating rates."
Cut likely to be the last
Thursday's cut was widely expected by financial markets, irrespective of the outcome of the US election.
Wheeler told reporters that ahead of the announcement the Reserve Bank reviewed the decision in light of the surprise victory by Donald Trump, but decided not only that the decision was the right one, that its statement did not need to change.
The kiwi dollar remained stronger than was sustainable, boosted by New Zealand's relatively strong interest rates.
"Political uncertainty remains heightened and market volatility is elevated," Wheeler said.
While economists do not generally expect more interest rate cuts, the Reserve Bank's statement did not rule out more in the future.
"Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly," Wheeler said.
ASB chief economist Nick Tuffley said the bank expected interest rates were likely to remain on hold in the coming months, although another cut was more likely in the near term than any increase.
"Inflation is likely to be back within the 1-3 per cent target band [by the end of 2016]. Dairy prices have recovered considerably. The labour market is tightening. Growth is running at an above-trend pace. It is not an economy that is crying out for urgent stimulus to boost inflation," Tuffley said.
"But the risks to the OCR remain skewed towards another cut next year... Key risks are the strength of the NZ dollar, any further weakness in inflation expectations, and any deterioration in the global growth outlook. The change of US Presidency will also be a wildcard over the longer term, with its mix of potential fiscal stimulus and potential trade protectionism."
'We wouldn't use DTIs even if we could'
Meanwhile, Wheeler said even if the central bank is given permission to introduce debt to income (DTI) ratios on borrowing, which would limit household debt to their income, it did not expect to do so in the current circumstances.
The bank has formally asked Finance Minister Bill English if DTIs can be added to the range of tools available to it under its memorandum of understanding with the government.
English has responded to the request with a series of basic questions, suggesting he may be reluctant to allow the bank to introduce them.