'Substantial fall in interest rates’

Press, 13 December 1985, Page 26

'Substantial fall in interest rates’

A spectacular fall in some interest rates, was now evident, the Associate Minister of Finance, Mr Prebble, has said. “The principal causes for the fall in interest rates appear to be a fall in inflationary expectations and a drop in the demand for credit as economic activity slows down,” Mr Prebble told Parliament during Question Time. Tn response to a question by Mr J. R. Sutton (Lab., Waitaki), Mr Prebble said there had been “a substantial fall in interest rates for deposits and in the wholesale lending rates over the last quarter”. Mr Prebble referred to recent advertisements by • financial institutions of , what they were prepared to

pay for money. “They have fallen spectacularly over the last three weeks,” he said. However, Mr M. E. C. Cox (Nat., Manawatu) said a Reserve Bank bulletin released yesterday showed private savings bank interest rates for six to 12 months had increased from 18.5 per cent to 21 per cent; mortgages had gone from 18.5 per cent to 19.5 per cent; and secured deposits for finance companies were increasing from 19.75 per cent to 21.75 per cent for one year and 21.5 per cent to 23 per cent for two years. Mr Prebble said he had not seen the bulletin, but he accepted Mr Cox’s word. “Therefore I ask him to accept my word when I tell ■him that interest rates are,

in fact, falling and all he has to do is read the newspapers and he will see that is a fact.” Mr Prebble said interest rates the Government was paying were falling and the latest 77-day Treasury Bill rates had dropped to 17.6 per cent. “That is the first sign that interest rates are falling.” Asked by Mr G. T. Knapp (Dem., East Coast Bays) when domestic mortgage rates would start to fall, Mr Prebble said he expected them to come down in the new year”. Referring to commercial bill rates, Mr Prebble said there had been “a spectacular decline in interest rates and that will have an impact rigjht across the market”