LOWER INTEREST

Dominion, Volume 28, Issue 33, 2 November 1934, Page 10

LOWER INTEREST

Fixed Deposit Rates FURTHER CUT TO-DAY Overdrafts Lower From End of Month STATEMENT BY BANKS A reduction in the minimum overdraft rate for best accounts to 4$ per cent, as from November 30, and a farther reduction of i per cent. on ail fixed deposits as from to-day, are announced by five of the six trading banks. The new overdraft is said to be the lowest ever charged in normal c:fees by the banks in New Zealand. The following official statement was issued yesterday by the undermentioned banks: — Bank of Australasia. . Bank of New Zealand. Commercial Bank of Australia, Ltd. The National Bank of N.Z., Ltd. t Union Bank of Australia, Ltd. Fixed Deposits, The rates of interest allowed.. ° n fixed deposits on and after November 2 will 'be as follow t Percent, p.a. On deposits for any period between 3 and 6 mouths It On deposits for any period from 6 to 12 months if On deposits for any period from 12 to 24 months On deposits for 24 months -i Advances. From November 30, overdraft rates for best accounts will be reduced frefin the present rate of 5 per cent per annum to 4$ per cent; per annum. For the reason that the banks continue to pay the higher rates on current fixed deposits until their maturity, it is necessary that some time should elapse before interest rates on advances are reduced, but on this occasion the banks have shortened to a great extent the customary period which intervenes between reduction in deposit and advance rateb, and, from the point of view of borrowers, this is a very favourable feature in these latest reductions. In commenting on the reductions in interest rates announced, the chairman of the banks (Mr. E. I’. Yaldtyyn) stated that in reducing advance rates for best accounts to 4| per cent from November JIO the banks were making a very real concession, especially as they would continue to pay interest at 31 per cent, until July, 1935, and 3 per cent, until July, 1936, upon very substantial portions of their fixed deposits. It had to be remembered, »he stated, that overdraft interest was charged on the day-to-day balance of a customer's account, which made overdraft accommodation much cheaper than a fixed loan, and, in effect, reduced the net rate to the borrower considerably below an equivalent mortgage rate. The rate of 4J per cent, per annum was the lowest rate ever charged, in normal ca'ses, by the banks in New Zealand for overdraft accommodation, although lower rates had at times been accepted by them, in certain cases to relieve hardship. The chairman of the banks also emphasised that after November 30 the minimum overdraft rate in the Dominion would compare favourably with that ruling in any part of the British Empire, with the possible exception of .certain isolated advances in England 'against “gilt-edged’* securities. In Canada, South Africa and other parts of the Empire, the rates charged by the trading banks.were higher than had been the case in New Zealand for some considerable time.

The result of the experiment in reducing rates to the present low level would be carefully observed by the banks, stated- the chairman, and it was hoped that it would tend to further increase confidence among the farming and business community. The Bank of New South Wales, which is not associated with the other trading banks in the above official announcement, had no statement to make on the subject yesterday. The latest' reduction in interest rates on fixed deposits is the sefenth made by the banks since April, 1930, when the rate for 24 months was lowered to 5 per cent. On August 20, 1931, the rate was reduced to 4} per cent.; on Mar 31, 1932, it was brought down to 4 per cept.; on December 2, 1932, it was reduced to 31 per cent.; on July 11, 1933, to 3 per cent.; and on. July 5, 1934, to 21 per cent., the rates for shorter periods all -being reduced proportionately on the same dates. High Level of Fixed Deposits. The'fixed deposits held by the six trading blinks in New Zealand at September 24, .according to the latest return which is printed on the Financial and Commercial page of this issue,--totalled £39,580,720, a reduction in four weeks of £076,280. On June 18 fixed deposits stood at £41,645,912. The total of fixed and free deposits at September ‘24 was £05,358,040, a decrease since August 27 of £1,089,541. Advances and discounts of the trading banks at September 24 totalled £41,603.073. an increase since August 27 of £342.063. The ratio of advances and discounts to total deposits in N ew Zealand as at September 24 was 63.65 per cent., compared with 6-.od per cent. at. August 27, and 04.-a per cent, at July 30. The Overdraft Rate; The minimum rate on interest for overdrafts on -best accounts was last reduced by the Associated Banks on May .l, 1933, from 6 -per cent, to 5 per cent., and this is now to be reduced by. the five banks mentioned above to 4i per cent., as from November 30 next. The rate was previously lowered on November 1, 1931, from 7 per cent, t 6i per cent., and again on September 1, 1932, from 6} per cent, to 6 per cent.