INTEREST RATES

Timaru Herald, Volume CXXXVIII, Issue 19946, 2 November 1934, Page 8

INTEREST RATES

DEPOSITS AND ADVANCES REDUCTION BY BANKS By Telegraph - Pres* Association WELLINGTON, November 1. The following official statement was issued to-day by the Bank of Australasia, the Bank of New Zealand, the I Commercial Bank of Australia, the I National Bank of New Zealand, and ■ the Union Bank of Australia. The rates of interest per annum allowed on fixed deposits on and after November 2 will be as follows: Per Cent. : On deposits for any period between 3 and 6 months l| I On deposits for any period from 6 to 12 months ij On deposits for any period from 12 to 24 months 2k : 011 deposits for 24 months .... 2J From November 30. overdraft rates for best accounts will be reduced from the present rate of 5 per cent, per annum to 41 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 the interest rates on advances are reduced, but on this occasion the banks have shortened to a great extent the customary period which intervenes between the reduction in the deposit and advance rates, and from the point of view of borrowers. this is a very favourable feature in these latest reductions. Statement by Chairman Commenting on the reductions the chairman of the Associated Banks. Mr E. P. Yaldwyn, stated that in reducing the advance rates for best accounts to 41 per cent, from November 30. 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 rata of 4* per cent, per annum was the lowest rate ever charged in normal cases 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.

Mr Yaldwin 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, and it was hoped that it would tend to further increase confidence among the farming and business community.