A focus on banks' marginal funding costs, and not its average funding costs, proves that the floating mortgage rates can still go lower because the spreads are at historically high levels, the Reserve Bank of New Zealand said in an analysis published on Monday.Fixed mortgage rates are appropriately priced as the spreads on them are now at normal historical levels, the RBNZ said.After repeatedly calling for lower floating rate mortgage rates in the last couple of months, the RBNZ supported its claims by publishing its analysis of banks' funding costs.The RBNZ acknowledged the analysis of bank funding costs promoted, for instance, by Westpac, but said it did not concur with the use of average funding costs as an appropriate basis for marginal pricing decisions. Banks focus principally on the cost of raising funds at the margin rather than the average cost of funds measured across their existing stocks of funding, the RBNZ said.The RBNZ noted that marginal funding costs have now increased by around 100 to 150 basis points over the official cash rate from around 20 to 30 basis points prior to the global financial crisis.This means that when the OCR was at 8.25 per cent, banks' marginal funding cost was up to 8.55 per cent. With the OCR at 2.50 per cent currently, banks' marginal funding cost is now up to 4 per cent, the RBNZ's analysis indicates.At 8.25 per cent OCR, the floating mortgage rate was at 10.74 per cent, which means banks earned a spread of 219 basis points at the highest marginal funding cost of 8.55 per cent.Currently at 2.50 per cent OCR, the floating mortgage rate is at 6.44 per cent, which means banks now earn a spread of 244 basis points, again at the highest marginal funding cost.This means banks are currently earning a minimum of 25 basis points more via interest rate margins, which could rise to 85 basis points, if we calculate using the lower end of the marginal funding costs.