Farmer Satisfaction With Banks Better - But Fragile

Farmers are feeling more satisfied with their banks, pointing to improved communication and less ‘undue pressure’, Federated Farmers’ latest Banking Survey shows.

"It’s good to see things are improving but farmers’ trust in their banks is still fragile," Federated Farmers banking spokesperson Richard McIntyre says.

"Where farmers have given positive feedback in the survey, it’s usually about their individual managers, not bank policy.

"When those individual staff leave, that trust can erode quickly."

Nearly 700 farmers responded to the May survey, with 60% of them ‘satisfied’ or ‘very satisfied’ with their bank.

That’s up from 53% in Federated Farmers’ November 2024 survey but well shy of the 80% peak rating recorded in 2017.

"It’s helped that over the last year banks have been grilled by the select committee inquiry on banking competition that Federated Farmers pushed for," McIntyre says.

"There has been a lot of scrutiny and banks have definitely been feeling the pressure, so it’s good to see them start to lift their game as a result."

In the survey, 61% of farmers rated their bank’s communication as good or very good - the best result since 2020.

Just on 18% of farmers said they were feeling undue bank pressure, down from 24% six months earlier and the lowest rating recorded since 2018.

"Many farmers said bank pressure has eased over the past six to 12 months, with some noting their bank had become more understanding or backed off earlier demands," McIntyre says.

"However, for those still under pressure, the situation remains serious.

"A few farmers shared difficult stories with us, including being forced out of farming altogether."

One farmer said: "We’ve sold the farm. If the bank had been more understanding, things might have been different."

The survey shows interest rates on farm mortgages have also eased by about 1% since late 2024 to an average of 6.52%.

"Even so, we’re still very concerned that, compared with average residential mortgage interest rates, farm mortgage interest rates are around 0.92% higher - and were about 1.12% higher late last year," McIntyre says.

From 2016 until 2021, the margin of difference hovered between about 0.6% and 0.35%.

"These don’t seem like big differences, but when total agricultural lending is around $61 billion, a 1% margin difference puts $600 million of extra interest costs on the sector each year.

"It’s crazy how much more money farmers are having to shell out to the banks in interest payments.

"Part of the problem is the unnecessarily conservative Reserve Bank capital requirements, and the recent decision to review those settings is very welcome," McIntyre says.

"What we desperately need as well is stronger competition among banks in the rural sector. That would really help lower costs for farmers and drive better bank performance."

In the open comment section of the May survey, many farmers said they were still paying far too much in interest.

Several expressed frustration that banks were quick to hike rates, but slow to pass on savings when the OCR falls.

"OCR drops come through like a feather. Increases hit like a brick," one said.

The May survey also found that just under 20% of farmers said their bank has inquired about their farm’s emissions profile or environmental footprint as part of loan requirements.

Westpac and ASB were much more likely to ask such questions, at 32% and 40% respectively.

"Federated Farmers’ view is that our democratically elected Government is the correct body to be setting emissions and environmental policy, not banks," McIntyre says.

"Farmers are closely watching what’s happening with Bills passing through Parliament, promoted by MPs Andy Foster and Mark Cameron, that would rein in banks’ ability to make lending decisions on non-commercial grounds."

Foster’s proposed law would prohibit banks from refusing loans or services purely for environmental or emissions reasons. May survey responses show 70% of farmers support such a law (18% oppose, 12% unsure).

Other key findings from the survey:

Farm Debt Levels: 84% of farmers surveyed have a mortgage. The average mortgage in the survey was $4.7 million, compared to $4.4 million six months ago.

Overdraft Use Declining: Only 76% of farms now have an overdraft facility, down from 88% a decade ago.

Overdraft Limits: Average overdraft limits have risen to $349,000. Arable farms saw the largest increase (from $500k to $718k).

Overdraft Interest Rates: Rates have dropped. The average is now 9.0%, down from 10.0%. Rabobank offers the lowest (7.3%), while BNZ remains highest (9.7%).

Efficiency Concerns: 19% of farmers feel their bank isn’t allowing them to structure debt as efficiently as possible - down slightly from 23% in November. Rabobank and ANZ performed best; Westpac performed worst.

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