Banks raise interest on deposits, loans

Press, 24 July 1984, Page 9

Banks raise interest on deposits, loans

Thousands of Trusteebank Canterbury account-holders are now getting more interest on their deposits. A 2 per cent increase in interest paid to “hit” account holders was announced yesterday by the bank. The new daily interest rate is 10 per cent. The bank’s general manager, Mr Frank Dickson, said the move was in response to the competitive market and the lifting of interest rate controls by the incoming Government last week. An announcement on altering rates on term investment accounts is expected from the bank today. The higher deposit rates are likely to affect lending rates. The bank would probably decide on changes to mortgage and other lending rates in the next week or 10 days, Mr Dickson said. The 2 per cent increase in deposits could be “some kind of indicator” to the level of increase in mortgage and lending rates, or it could be more. The final lending rate would depend a lot on where final deposit rates settled, Mr Dickson said. Government restrictions meant lending rates had been artificially low and now those distortions had been removed the market

would find its own level again, but it could take some weeks to settle. Mr Dickson said a number of financial institutions had not lowered their mortgage interest rates on housing loans as the Trusteebank had done and so the bank had “no room to manoeuvre.” The general manager of the Bank of New Zealand, Mr Bill Shaw, said last evening that only one of that bank’s interest rates on deposits had changed since the regulations were altered. But other deposit rates were under review and a decision was expected in the next few days. Although he wanted to see the market settle before the rates were changed the bank was “ready to go” if necessary. The bank had no plans to change mortgage rates at present. “We’ll see how the whole market moves and take a decision then,” Mr Shaw said. Westpac has also increased its deposit rates for new deposits. The new rates range from 10 per cent for 30 days to 13 per cent for two years. These rates introduced last week apply to new deposits or maturing deposits that are renewed. The National Bank had

made only minor changes to its deposit rates since the regulations were altered, said the manager of the Christchurch branch, Mr Derry Lee, last evening. Other lending institutions had reacted rapidly to a changing situation. The National Bank did not think the market had adjusted itself to the new circumstances, but it was reviewing the situation daily, Mr Lee said. A spokesman for the A.N.Z. Banking Group could not be reached last evening. The United Building Society also reviewed its deposit and lending rates yesterday, in response to the lifting of the interest rate restrictions. New on-call deposits will receive 10 per cent instead of the previous maximum of 9 per cent, and term deposit rates for new deposits have also increased between 1.25 and 2.75 per cent. Higher lending rates for new mortgages were also introduced by the building society. The 11 per cent rate for new mortgages has risen to 14 per cent, and the second mortgage rate of 14 per cent is now 16 per cent, said the manager, Mr Colin Jenkins, last evening. The rates were continually under review because of the market uncertainty, Mr Jenkins said.