Lower interest rates for savers and borrowers

The latest batch of rate cuts from ASB, the Co-operative Bank and SBS take term deposit rates, and in Co-op's case, mortgage rates too, lower

17th Jun 15, 12:01pm by Gareth Vaughan

Bank interest rate cuts for both savers and borrowers are continuing following last week's cut to the Official Cash Rate, by 25 basis points to 3.25%, from the Reserve Bank.

The latest moves are from ASB, the Cooperative Bank and SBS Bank.

Following on from cutting its home loan rates, ASB has also cut a range of carded term deposit rates. The biggest cut is to its one month rate, which has been slashed by 50 basis points to 2.75% The cuts, for savers with a minimum deposit of $10,000, stretch all the way out to five year terms. After the one-month rate cut, the next biggest are 35% basis points cuts to ASB's four and five year term deposit rates, reducing them to 4.25% and 4.30%, respectively.

The Co-operative Bank has cut all its term deposit rates by 15 basis points, plus reducing interest rates on a range of savings products by 25 basis points. The Co-operative Bank has also reduced its six month, one year , two year, three year and four year home loan rates, with each cut by 14 basis points.

Co-operative Bank's term deposit rates, for savers with a minimum $2,000 or $5,000 deposit, now range from 3.75% for three months to 4.40% for four years. For a minimum $10,000 deposit, they range from 3.85% to 4.50%.

The Co-operative Bank's new six month mortgage rate, at 5.45%, is the lowest carded rate from a bank for this term. This is against a backdrop of expectations the Reserve Bank will cut the OCR again this year.

SBS, meanwhile, has cut term deposit rates by between 10 and 30 basis points, with its six to 11 month term deposit rates cut 30 basis points to 4.15%, and its three year rate cut 10 basis points to 4.50%. SBS has also cut rates on its i-save online saver and three call rate accounts by 25 basis points.

See all banks' carded, or advertised term deposit rates for one to nine months here.

See all banks' carded, or advertised, term deposit rates for one to five years here.

See all banks' carded, or advertised, home loan rates here.

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12 Comments

by dtcarter | 17th Jun 15, 1:01pm 1434502897

Still no cuts to the floating rates. Aren't they supposed to be the most closely linked to the OCR?

by Gareth Vaughan | 17th Jun 15, 1:44pm 1434505471

Several banks did cut their floating mortgage rates last week.

by muntijaqi | 17th Jun 15, 2:29pm 1434508163

We have an economic/political system that encourages debt, spending and living with future's wealth in a similar way as with the environment, using as much as we can/want without thinking of future generations.

When things fail, leveraged borrowers cry and ask for a bailout. And as the whole system depends on keeping the state of things, they are bailed out to avoid further drama at everyone's expenses (usually through further future wealth brought to present).

The funny situations happens when the rational thinking and sensible with the future people decide not to spend what they don't have, not to buy when market is overpriced, not to believe in myths like "property ladder" or "investment in property" when there is absolutely no assurance that property prices will keep growing, not to be greedy and take only what we need and not to believe that we all can become richer by selling assets to each other and "inventing" the money to pay for them.

These people are not only not rewarded, but also marginalized for not joining the party. Relative poverty plays against their situation in such a way that if they want to keep pace with things and not to disadvantage their kids they need to play the same dangerous game and forget about tomorrow. After all it seems more important to gather all we can now rather than leaving something for the next generations to make their own living.

Fractional reserve, growth based on debt, getting too big and too systemic to never fall. It's all part of the same way of doing things.

“It is no measure of health to be well adjusted to a profoundly sick society.”

So here we go, lets keep encouraging debt. Dairy farmers don't make that much profit? Lets lower our currency so we can export more (don't even think of reducing farming levels or even question the reasons global demand for commodities decrease!), and lets lower OCR so people/businesses don't stop borrowing. The wheel cannot stop rolling!

Instead taxing capital gains we tax job income and savings. Why to work at all or why to invest in productivity increase when you can have money working for you ad infinitum?

So yes.. it's not surprise we, savers, get punished. Better if we start borrowing or invest in not taxed "businesses" with out of thin air created money.

In the meantime NZ has a bigger account deficit which mean that national debt will grow more and more as our State needs funding!

by Frostwind | 18th Jun 15, 9:44am 1434577499

muntijaqi, while I respect everyone have their own opinion, I wholeheartly disagree with your view.

You savers are the root cause of the problems, primarily because you lot don’t consume and just save, save and save. The banks are flooded with cheap and ever cheaper deposit money. Due to the nature of the fractional reserve banking system, the money supply needs to grow, or the interest rate needs to drop to keep debt level serviceable. The banks are the white knights that have a very difficult task to combat deflation, so they are being forced to lend the excess money to people who don’t really need it. This creates a worldwide bubble in bonds, stocks and properties, savers are directly responsible for this, although they themselves seldom recognize it as such. Savers contribute nothing to society unlike investors do, investors buy up houses and fix them to provide accommodation to those that need them. As you can see they are serving a very important function in maintaining the housing stocks available on the market, while savers just sit there, whine and do nothing. Given the disparity of contributions between investors and savers, it’s therefore only logical, and ethical, to create rules that favours the investors/borrowers over savers. As a society we would all be better off if there are fewer savers and more borrowers, it’ll grease the economic wheel.

As for your rant regarding “rational thinking and sensible with the future people” being sheared like sheep. I fail to grasp the concept that you lot are the victims of the system, as per my paragraph above, you lot are clearly directly responsible. Sure, a minority of over-leveraged speculators can create systemic risks if there’s sudden reversal in markets, but they are just a minority. The majority of investors/borrowers are sensible people who are just trying to build a future for themselves by adding values to society, and it’s only proper that they get richly rewarded for their efforts, at the expense of the do-nothing savers.

Hope you can see the light in this and start replacing your deposit accounts with loans, and you’ll start to see the world for its beauty, rather than feeling victimized, without any justifications.

by muntijaqi | 18th Jun 15, 11:52am 1434585160

Saving doesn't mean not consuming, but delaying consumption.

Saving also means that we wait until we have the money to spend in order to buy something, rather than borrowing what we don't have and promise to pay it back. In other words, savings means ensuring we don't steal everyone's else savings through the inflation that monetary increases would cause when borrowing.

I understand the show must go on with debt. That's the root of my complaint, the way the system works. I would immediately make the cash reserve ratio to 100% so banks cannot be leveraged and lend what they don't have.

There is a myth that says deflation is bad because it delays consumption hence it stops the economy. The truth is that it delays consumption that can be delayed (so it's consumption not really needed), but people won't stop buying food or a car just because "tomorrow" would be cheaper if they need it now.

Encouraging debt is encouraging inflation, promoting over consumption and enslaving people into workforce. From an environmental point of view, the system is wrong and harmful.

Savers are not the cause of bubbles nor the cause banks have to offer cheap credit. It's the lack of regulation and limits when creating money out of thin air and banks' greed what creates this.
Why not to legislate so private banks are allowed to exist but CANNOT make profit out of wealth they don't own? Lets not forget that lending money is a privilege for banks because they don't own that money (in fact it doesn't even exist until the loan is created).

You talk about savers like the opposite to investors. That's a misunderstanding.
An investor can invest with his own money or with borrowed money. Investment is not related to savers. I am not talking about hiding money under the mattress. I'm talking about investing my savings in real productive economy, not in financial speculation. No problem at all with investment when the money has already been saved.
And I could even allow borrowing if the investment is justified and goes into productive economy, but not when it goes to financial and speculative economy (like buying assets just to sell them later more expensive to buyers that borrow the money to pay for it)

The only way to contribute to society is through work, through real value. Borrowing might look like contributing, but it's only a way of bringing future work (real value) into the present, hence stealing it from future generations.

So the term investor is good when talking about investing real value into something that will create even more real value (PRODUCTIVITY increases). But to understand this you have to think in terms of what borrowing really means and understand that the real value must come from somewhere, either now or in the future. May the future generations forgive us.

by muntijaqi | 18th Jun 15, 12:04pm 1434585844

but I guess you are one of those who think prices always go up so investing with borrowed money is always justified..

Look at the data of last investment in productive economy despite cheap credit.

Where is the investment in real wealth? Where is the contribution from borrowers into society? Where is even the inflation? There is none, Credit is so cheap and financial speculation so easy that what we are doing is not only hurting our future but also taking a risk that will hurt us all in the present.

by muntijaqi | 17th Jun 15, 2:32pm 1434508364

bad news for savers, again.
https://garethsworld.com/blog/property/why-our-tax-system-encourages-ri…

by Stephen Hulme | 18th Jun 15, 12:00pm 1434585633

The biggest cut is to its one month rate, which has been slashed by 50 basis points to 2.75%

What is it with the Aussie banks? - why do NZers have to pay them excessive tribute? I notice ICBC is offering above the OCR at 3.35% for size one month term depo - given the unaddressed parlous state of the economy one would expect a time based risk premium.

by KH | 18th Jun 15, 12:30pm 1434587438

"Frostwind" is just getting it wrong. He / She says "You savers are the root cause of the problems, primarily because you lot don’t consume and just save, save and save."
He want's me to be a big consumer and I am. And I am a saver still. All my life I have spent less than I earned. Subsequently I now have a big cashflow and are able to afford to spend more than I would have otherwise. If Frostwind wants consumption then maybe he/she should think of getting away from paying interest so the funds can go into the desired consumption.
For some people it will not be spending money on frippery. If they were not in debt they could spend more money on food.
Actually it's the likes of frostwind who are buggering up the economy.

by muntijaqi | 18th Jun 15, 2:12pm 1434593521

Is it the same to consume with existing earned money than with borrowed money?
That's the key point.

He is also wrong when assuming that savers spend less in the productive economy than borrowers as you said.

by tim12 | 23rd Jul 15, 4:50pm 1437627024

I tend to agree with your thinking muntijadi. Interest rates being lowered to stop farmers going broke, because they have too much debt, is encouraging more and more debt everywhere which traps us in economic stagnation because of growing asset bubbles. America has talked for a while about raising interest rates, it will be interesting if it can happen.

by steven | 23rd Jul 15, 6:26pm 1437632818

While I agree generally, I dont agree with "everywhere", only in Auckland is housing debt crazy. Economic stagnation is I think due to too expensive energy, and yes the asset bubbles are indeed huge. I'd suggest our economic stagnation is simply because of so much mis-allocated credit/capital but that is free choice of investors, I cant see how to fix that.