We compare the 'default' and 'excess' interest rates that face mortgage borrowers who don't make their payments on time or bust their limits

We compare the 'default' and 'excess' interest rates that face mortgage borrowers who don't make their payments on time or bust their limits

ANZ has updated its website to disclose its 'default' interest rates in a clearer manner.

These are the rates that will apply if you miss a payment or don't make one by the due date.

Or, as ANZ says, "If you do not pay the amounts when they are due, we can charge you interest on those amounts at the default rate".

Presumably, the key reason you might miss a payment is because your are financially stressed. After the bank is finished with you you will be even more financially stressed.

Default rates generally range from +2% to +5% on top of the interest rate you are paying, with BNZ applying the low at +2%.

ASB takes a quite different view, applying a flat 22.5% rate for both excess and default rates which works out at about +16.25%.

But at least ANZ might make you ever so slightly less stressed than at ASB.

Here is where each bank stands on default interest with some key examples:

as at August 11, 2015 Carded rate Default rate Excess rate
    % pa % pa % pa
ANZ Floating mortgage 6.24 11.24  
  2 year fixed 4.89 9.89  
  Revolving credit 6.35 11.35 21.35
         
ASB Floating mortgage 6.25 22.50  
  2 year fixed 5.25 22.50  
  Revolving credit 6.25 22.50 22.50
         
BNZ Floating mortgage 5.99 7.99  
  2 year fixed 4.69 6.69  
  Revolving credit 6.24 8.24 13.2 +margin
         
Kiwibank                 Floating mortgage 6.15 11.15  
  2 year fixed 4.65 9.65  
  Revolving credit 6.15 11.15 22.00
         
Westpac Floating mortgage 6.15 11.15  
  2 year fixed 4.69 9.69  
  Revolving credit 6.15 11.15 26.95

An "Excess Rate" applies if you go over your "credit limit" which can happen in a revolving credit arrangement because it essentially operates like a giant overdraft, secured against your property. Some banks call this an 'unarranged overdraft fee".

All rates in this story have been sourced from each bank's websites today. They are subject to change. Banks allow themselves discretion in their fine print by saying "may charge ..." or "can charge" rather than "will charge ...".

Obviously if you think you may have trouble making a payment or meeting a due date, you are almost always better to raise the possibility with the lender well before that date arrives. No one wants to show weakness to their bank but facing up to the consequences without warning them it is coming will likely be tougher.

Your "friendly loan company" is closely associated with the "unfriendly collection company".

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10 Comments

Timely eye-watering eye-opener

You forgot to mention that according to the OBR if a bank is financially stressed they will pay you a 20% default rate on your deposits. Ah no wait they will give you back maybe the 20% of your deposits

Savers are so last century.

Becoming so like the 80's, when I was hammered if i went over my O/d limit, mind you I was starting with %18.5 interest.

I have bank accounts with ASB with over 6 figures. One of my accounts went into OD by $100 and they charged me for it. They even sent me a letter to my o/seas address. Without a mega-mortgage, you're nothing to them.

Well if Jesus Christ doesn't get decent service, what hope have the rest of us?

Move!

Same here. The charge is only a tenner but it makes the blood boil. When suffix 00 gets O/d by $20 and suffix 01 of the same account has on call money in it, it's ridiculous to charge a fee like that. However, the only way around it is to get text and email alerts which gives you a bit of time to make this right before they apply the charge at 11:45pm. Through the lens of bank customer service goggles, this is a great solution and brilliant service. As this article shows, the banks still have a long way to go re fairness.

I hope all here that have been charged that unexpected $10 fee, when other clear funds were in another account, called the bank and asked for an explanation? 9/10 they'll just say "Oh . If it was a misunderstanding, we'll re-credit that to your account" and they do.....

Well.
With new credit requirements now in place....plus all the reporting and compliance and rules and regs, and having diversify away from real estate, the only way banks can make money these days (to pay their inflated CEO wages), charging fees for every single little thing is how they make their money.