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In our previous article, What a Decade of Floating Rates Tells Us About Agri Finance Confidence, we explored how floating interest rates have behaved over time and how bank appetite has shifted in response to rising rates. The core message was this: while interest rates have moved in cycles, the bigger issue has been how confidence—both from banks and farmers—has fluctuated alongside them.
Now, we want to take that discussion a step further.
Same graph. One big addition.
This time, we’ve layered in a second line—the red one. This represents the non-competitive floating rate, or in plain terms, the rate paid by a farmer whose credit wasn’t quite as good (or wasn’t articulated well enough) and hasn't actively engaged in a competitive lending process. It’s someone who, for whatever reason, hasn't negotiated, hasn’t benchmarked, and hasn’t brought an advocate like NZAB to the table.
The green line, as before, is the competitive rate—what’s available when a farmer actively shops their deal, presents a strong case, and gets support to navigate the lending environment.
What’s the difference?
Over the last 10 years, the cumulative interest cost difference on a $10 million loan between the red line and the green line is a staggering $782,916.
Let that sink in.
$782,916 – for the same amount of debt, over the same period.
No extra risk. No change in the security. No change in business performance. Just a difference in approach.
It’s a high price to pay for inertia.
Why does this gap exist?
Banks operate within wide interest rate corridors. Within those corridors, margins are priced based on credit risk, but also on competition—or lack of it.
A farmer with a good understanding of their credit risk (want to understand more about credit risk- see here) and has specialist advisory managing the process, tends to land toward the bottom of the range. A farmer who doesn’t—who lets the bank take the lead, doesn’t challenge pricing, or avoids awkward conversations—often lands at the top.
Over time, those margins compound.
What’s particularly disappointing is that the difference isn’t about credit quality. In most cases, the non-competitive borrower is just as good a risk as the competitive one. They’ve just chosen to fly solo, or perhaps didn’t know they had an alternative.
Confidence cuts both ways
There’s a second, less visible—but arguably more damaging—cost here too: the cost to confidence.
Farmers who ultimately have to pay more, or don’t have the full picture, become hesitant. They delay decisions. They question whether they’re in the bank’s favour. They retreat.
This often results in missed opportunities.
Instead of investing in productivity, upgrading infrastructure, or moving on a land purchase, they sit back and wait. Sometimes they wait for “rates to come down.” More often, they wait for someone to give them confidence—but that someone never arrives.
On the flip side, farmers who understand their funding position clearly—and know they’ve got sharp pricing—tend to act. They know the numbers stack up. They can forecast with confidence. And they have someone in their corner if anything changes.
That difference in mindset doesn’t just affect individual farms. It ripples through the entire sector.
We see this play out every day
At NZAB, we work with farmers across New Zealand and we see both lines of this graph in real life—sometimes within the same rural road.
We’ll sit with one farmer who’s paying 7.5% and feeling squeezed, then two days later with another just down the road paying 5.5%, despite having a similar risk profile.
It’s not just interest rates either. The competitive borrower often gets more flexibility, better covenants, and faster responses—because the bank knows the relationship is actively managed.
It’s not about changing banks
To be clear, this is not about “bank shopping” or switching every year. Banks don’t like transactional behaviour, and nor do we.
It’s about creating and maintaining competitive tension—and having a strong narrative that shows the bank you understand your position, have alternatives, and will act if you need to.
Sometimes that means changing lenders. But more often, it means rebalancing the relationship with your current one.
The numbers are clear
If you’re a farmer with $10 million of debt, you can’t afford to carry another $782,916 in unnecessary interest costs. That’s money that should be going into the farm—not to the bank’s bottom line.
Let’s say you're averaging even half that size in debt. That’s still nearly $400,000 over the last decade that’s been silently slipping away.
And remember: that’s just the interest cost. It doesn’t account for what hasn’t been done in the business because of lower confidence or reduced headroom.
The takeaway?
Farm finance isn’t just about debt—it’s about credit positioning.
Your story matters. So does your process. And most of all, the people you have around you to guide that process.
Capital isn’t just about rates. It’s about confidence. And when you get it right, the returns are exponential.
Need help getting onto the green line?
We help farmers understand their capital position, engage with banks and alternative lenders, and ensure they’re getting the best outcomes available—every time.
Because in a competitive capital environment, the cost of getting it wrong is too high to ignore.
If you want to have a no obligation chat, feel free to call one of our local team members in Southland, Canterbury, Manawatu, Taranaki or Waikato (or flick us a quick email here)
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