'Excessive' and 'undue' pressure from banks - Feds

Conducted in mid-November, the survey also shows farmer satisfaction with their bank is at record lows.

Of the farmers surveyed, 25.8% felt they had come under ‘undue pressure’ from their bank over the previous six months, up 2% from May to a new record high.

While 55.6% remain satisfied or very satisfied with their banking relationship, this was down 0.7% from the last survey in May – a record low since the survey began in May 2015.

Federated Farmer domestic commerce and competition spokesperson, Richard McIntyre says the results add weight to calls for an independent inquiry into rural banking.

“It’s a real concern that more than a quarter of farmers have felt like they’ve come under undue pressure from their bank,” McIntyre says.

He says farmers are already under sizeable financial and mental pressure due to a combination of high costs, falling commodity prices and extreme weather events.

“As it that wasn’t bad enough, now they also feel like they’re getting a raw deal from their bank,” he says.

“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,” he says.

McIntyre says those high rates, along with other additional factors, have left farmers with an appetite for an independent inquiry too.

“That came through loud and clear in the responses,” he says. “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 concerns about banks pushing for reductions in farms’ greenhouse gas emissions,” he adds.

Thus far, Bank of New Zealand and Westpac NZ have introduced climate targets for their farmer clients.

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.

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," McIntyre says.

With families farming through tough times, Federated Farmers are encouraging farmers to ensure they are maintaining detailed and up-to-date budgets.

The survey shows 64.5% of farmers have budgets for the current season, with the percentage rising to 75% for sharemilkers.

"But only 18% have budgets so far for next season, and although there’s still a lot of uncertainty about next year, we encourage farmers to plan for it too," McIntyre says.

He says it’s important for farmers to keep in touch with their bank, rural professionals, farm discussion groups, and other experienced farmers to work through any issues before they become serious.

"There’s also a great opportunity for farmers to talk to their bank managers about how the bank sees their business and what they can do to improve their margin over base and, therefore, interest rate.

"This could be as simple as more regular budget updates or proactively sharing a copy of your farm environmental plan.

"If things get bad, your local Rural Support Trust is there to help and there is Farm Debt Mediation too. We recently ran a webinar on how Farm Debt Mediation works and what to look out for."

Federated Farmers’ Banking Survey began in 2015 and is conducted twice a year.