Banks and the OCR

"the OCR, not counting last week's 50 basis-point cut, has fallen 5.25 percentage points. Variable residential mortgage rates by comparison fell from 10.9 per cent to 6.41 per cent over the same period."

This presumably shows that

"major banks have been dragging their feet in passing on OCR cuts to business borrowers."

The RBNZ lends at 0.5% above the OCR and borrows at 0.5% below it.

This means that when the OCR is above the free market intrest rate, like it was when it was at 8.25%, it artificially inflates it to its borrowing rate, so 7.75%. When the OCR is below the free market rate it artificially deflates the free market rate to 0.5% above the OCR, so 3.50% before last week.

so the artificial intrest rate had gone from 7.75% to 3.50%, a decrease of 4.25%. Over the same period residential mortgage rates fell from 10.9% to 6.41%, a decrease of 4.49%.

Since 4.49% is greater than 4.25% I conclude that major banks have not been"dragging their feet in passing on OCR cuts to business borrowers."

(http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10570612)

P.s. i have seen no data on actual wholesale credit rates, which would be interesting.