Farmers’ satisfaction with their banks has slipped to an all-time low in the latest Federated Farmers Banking Survey.
Driving the downward trend is a feeling among farmers that they’re under ‘undue pressure’ from their bank, and that they’re copping unfairly high interest rates.
Conducted in mid-November, the survey asked farmers about the level of satisfaction and support they’re getting from their banks.
Although 55.6% remained very satisfied or satisfied with their bank relationship, this was down 0.7% from the last survey in May and a record low since the survey began in May 2015.
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.
Richard McIntyre, Federated Farmers Domestic Commerce and Competition spokesperson, says the results add weight to the call for an independent inquiry into rural banking.
“Farmers are already under huge financial and mental pressure from high costs, falling commodity prices and weather events, but as if that wasn’t bad enough, they also feel like they’re getting an unfair deal from their banks,” McIntyre says.
“This is exactly why Federated Farmers has been calling for the Government to support an independent inquiry into rural banking, so farmers can be confident that their 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 higher, which is why we need the new Government to back an inquiry.”
Those high rates and other factors have left farmers with an appetite for an 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 was 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 better feeling about communication quality,” McIntyre says.
With the industry going through tough times, Federated Farmers encourages farmers to ensure they maintain detailed 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 season, 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 a copy of the farm environmental plan.
“And remember that, 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.
Federated Farmers, New Zealand’s leading independent rural advocacy organisation, has established a news and insights partnership with AgriHQ, the country’s leading rural publisher, to give the farmers of New Zealand a more informed, united and stronger voice. Feds news and commentary appears each week in its own section of the Farmers Weekly print edition and online.