Bank cuts interest rates

Press, 17 December 1985, Page 1

Bank cuts interest rates

PA Wellington The Bank of New Zealand yesterday announced a cut in its personal lending interest rates up to 2 per cent and a fall in its base overdraft rate. The B.N.Z. group executive, Mr R. B. McCay, also promised a review of home mortgage lending rates. ' He said interest rates on new personal loans would be cut 2 per cent immediately. The lowering in the base overdraft rate would take effect from December 23. This would mean a cut from 20.25 per cent to 19.25 per cent. Reviews of home mortgage lending rates would be

made in the coming months, and these rates would be reduced if the current downward trend in the cost of deposit-taking continued.

The bank’s revised overdraft rate for commercial, farming and personal customers represents a fall of 1 per cent on the rate charged at the peak of the interest rate cycle in October. Mr McCay said the reductions had been made possible because of lower costs of funding on the wholesale deposit market. The key to lower home mortgage rates was a fall in the inflationary expectations among professional investors and an expected fall in rates paid for retail de-

posits, he said. The general manager of Trusteebank Canterbury, Mr Frank Dickson, said that while interest rates were being reviewed daily, it could be up to nine months before mortgage rates fell. Interest rates paid to depositors would have to fall first and it would be between six and nine months before a drop in mortgage rates could follow, he said. Trusteebank Canterbury had Jagged behind other banks in putting interest rates up and so there would be a similar lag in reducing them, said Mr Dickson. “We are last to move up and so we will be some distance behind them on the way back down,” he said.