Comparing OCR and floating rates no longer relevant
Tuesday, May 10th 2016, 11:55AM
The difference between floating home loan rates and the Official Cash Rate is no longer a good measure of margins, ASB chief economist Nick Tuffley says.
He says the OCR doesn't represent the cost of funds.
While there was a clear relationship previously things changed after the Global Financial Crisis.
"The OCR does not reflect any credit risk premium," he told advisers at the recent SiFA conference.
"The way people are pricing risk has changed," he said. "The OCR is not really a relevant measure of margin as there has been a structural shift post the GFC."
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