Feds survey shows slight uptick in farmer-bank relationship

20 December 2021

Farmers are feeling slightly more satisfied with relationships with their banks but interest rates are starting to rise and some are reporting a tougher attitude from lenders.

Results from the November Federated Farmers Banking Survey show 67 percent of the more than 900 respondents are satisfied with their bank relationship, up 5.5 points on the May survey and a break in what had been a steady erosion in satisfaction since 2017 (when it was over 80%).

"It’s also pleasing to see that the 13.5 percent of respondents feeling ‘undue pressure’ from banks is down 4.4 points compared to six months ago," Federated Farmers President and commerce spokesperson Andrew Hoggard said.

"However, there are hints of more bumpy times ahead, with a quarter of farmers saying their lending conditions had changed since the May survey, and of those with changed conditions most said they were tougher rather than easier."

The average mortgage interest rate was 3.9% up from 3.8% in May. Nearly 90 percent are paying mortgage interest rates of less than 5% and no-one paying more than 10%.

"That slight uptick might be an early sign of higher lending rates arising from recent and forecast increases in the OCR," Andrew said.

"It may be that with strong commodity prices at present many farmers are concentrating on paying off debt. Since May, the average farm mortgage value has decreased from $4.27 million to $3.6m and the median from $2.2m to $2.1m."

Andrew said there were some noticeable changes in outlook for arable farms. They’ve become the sector with the largest proportion of mortgages (overtaking dairy) and the highest proportion of mortgages over $20 million, and they were the ‘least satisfied’ with their banking relationship.

This year’s survey asked a couple of one-off questions about use of cash, and while it was clear its use is on the decline nearly three quarters of respondents said it remained an important option.

Nearly a quarter of farmers said they used cash for at least some farm business transactions - highest for sharemilkers and lowest for arable. Some 82% said they still use cash for at least some personal transactions and nearly half said their rate of cash transactions was unchanged in recent years.

"Regardless of whether cash is used for business or personal transactions 74 percent considered it important for cash to remain available, 13 percent said it was not important, and 12 percent were neutral," Andrew said.

Other key findings from the November survey:
  • 57% of farmers say communication with their bank has been good or very good, down 1 point on May. As with overall relationship satisfaction, sentiment has been eroding steadily over recent years.
  • 62% of farmers had a budget for the current 2021/22 season and 24% had a budget for the next 2022/23 season. Sharemilkers are by far the most likely to have budgets; Meat & Wool the least likely.
  • Average overdraft interest rate was 6.3%, unchanged from May. 20% are paying overdraft interest rates of less than 5%, and 3.5% paying more than 10%.
  • ANZ had the biggest market share for both mortgages and overdrafts.
  • Farmers were most satisfied with Rabobank and Westpac.

Click here to view survey

For more information contact:
Andrew Hoggard, President Federated Farmers of NZ and commerce spokesperson 027 230 7363
Simon Edwards | Communications Advisor, Federated Farmers
Email: sedwards@fedfarm.org.nz, Mobile: +64 (0)27 484 8892