A survey conducted by lobby group Federated Farmers shows that over a quarter of the country's farmers are feeling "excessive and undue pressure" from their banks, while overall satisfaction levels with the banks have dropped.
The latest twice-yearly Federated Farmers Banking Survey, which has been conducted since 2015, and with the latest survey attracting 947 responses, adds weight to the call for an independent inquiry into rural banking, Fed Farmers say.
Of the farmers surveyed, 25.8% felt they’d come under 'undue pressure' from their bank over the previous six months, up 2% from May to a new record high.
Although 55.6% remain satisfied or very satisfied with their banking relationship, this was down 0.7% from the last survey in May - and was a record low since the survey began in May 2015.
Richard McIntyre, Federated Farmers domestic commerce and competition spokesperson, says the numbers of farmers feeling they had come under undue pressure was "a real concern".
"Farmers are already under huge financial and mental pressure with high costs, falling commodity prices and extreme weather events. As if that wasn’t bad enough, now they also feel like they’re getting a raw deal from their bank.
"This is exactly why Federated Farmers has been calling on the Government to support an independent inquiry into rural banking, so farmers can have confidence the banking systems are operating in a fair and proper way."
McIntyre says many farmers commented in the survey that their dissatisfaction was due to interest rates being too high - and much higher than those for residential borrowers.
The average mortgage interest rate in the survey was 8.26%, up from 7.84% in May 2023, and a big jump from its lowest point of 3.79% in May 2021.
Meanwhile, the average overdraft interest rate increased from 10.07% in May to 10.52% in November, up from a record low of 6.28% two years earlier.
"The banks seem to be charging far higher interest rates for farm lending than for home loans, which is raising eyebrows in farming households across the country," McIntyre says.
"Many also said their high interest rates are being imposed at a time when banks were reporting record profits.
"Farmers deserve to know why farm lending rates are so much higher than the rate on offer for things like urban home loans."
Those high rates and other factors have left farmers with an appetite for an independent inquiry too, McIntyre says.
"That came through loud and clear in the responses. There was concern about the state of competition in rural lending and some blamed the impact of regulation, such as bank capital requirements and risk weightings. "Some also expressed concern about banks pushing for reductions in farms’ greenhouse gas emissions."
The survey found 44.3% of farmers felt their mental wellbeing had been affected by their debt levels, interest rates, changing condition, or other forms of pressure. This is up 0.7% from May 2023.
McIntyre said that one positive from the survey was an improvement in perceptions about communication - breaking a run of declines over the past five years - with just under 57% saying their bank communications had been very good or good.
"Even so, concern about high interest rates is overwhelming any warm fuzzy feelings about the quality of communication."
10 Comments
CN - new: With respect to lending, everyone who is of sound mind, who agreed to the terms and conditions on the contract and voluntarily chose to sign that contract is responsible for meeting the terms and conditions of the contract that they voluntarily signed. That is the basis of contract law in New Zealand. Caveat emptor.
Nobody forced these farmers to take out massive loans. The farms already existed. Etc.
A slightly counter view for balance
Recently the Reserve Bank unilaterally decided to forced banks to hold more capital against their Agri loans, impact was that banks unilaterally upped there margins to the sector too guarantee there returns because of increased capital they were required to hold against said loans,
hence the interest margin over and above housing loans.
The lack of competition the banking sector meant these extra margins were just added.
I know it sucks, but unfortunately that's just business. Farmers always knew Agri loans would have a much higher interest rate than residential. And that interest cost is deductible isn't it being a business?
Did the interest rates on Agri loans triple in the space of 2 years? That's what happened with resi mortgages, and those young stretched households can't fall back onto mortgage deductibility on their primary residence.
Nope we didnt and they werent higher than residential about 5 years back. I well remember too our bank person telling us interest rates will not go above 6%...everyman and his dog would be bankrupted if they did. She said.
A lot of people were given bum advice by the so called experts. Thankfully I did not rely on this advice myself. But lets face it...both rural and residdntial have been shit on by the system ...that dropped interest rates to ridiculous levels then racked them back up and over ...it almost seems deliberate.
This may sound boring
1. don’t believe everything from people trying to sell you something
2. look at the long term rate average - if you are well below it won’t last and if well above it won’t last.
3. Borrow when rates are very high and repay when rates are low. This limits what you borrow when high and when low repay it back faster.
4. there is always another opportunity that will swim by. Don’t be upset about missing on something if it’s outside proper risk and return principals.
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