Hard on the heels of its mortgage rate cuts, ASB and BankDirect have cut their savings and transactional account interest rates.
Almost all the reductions are -25 basis points.
These changes come ahead of the widely expected Reserve Bank Official Cash Rate cut to 2.75% from 3% this Thursday.
The key reduction is to take their ASB Fastsaver product to just 1.90%, down -25 bps from 2.15%.
The 1.90% rate also applies to ASB's Business Saver account and their Unlimited Saver account (if you have $100,000 or more in it).
BankDirect's transactional account will also now only pay 1.90% for balances over $100,000. They will need to be careful with the naming of this account - it is called a "High interest transactional account" but there is nothing 'high interest' about this account.
BankDirect's Savings account has been reduced to 2.25%, down from 2.50%.
Cuts also apply to ASB's Cash Fund, Savings on Call, and their bonus saver Savings Plus products.
The bonus saver has also fallen -25 bps from 3.65% to 3.40% if you make no withdrawals in a month.
Crossing the inflation Rubicon
These changes cross a line. No longer can customers in most of ASB's savings accounts that now pay 1.90% count on these returns being higher than inflation. Savers on a 33% tax rate will net just 1.27%, those on a 17% tax rate will net less than 1.58%. At these levels they will be barely matching inflation any more. 'Real' gains have now evaporated for these ASB savers.
This is where 'financial repression' starts to mean something intensely personal for Kiwi savers.
At this time ASB have made no announcements on their term deposit rates. But reductions there will not come as a surprise when they do.
Until then, savers still have the option to shift at-call balances out to committed term deposits. But you will probably need to move quite quickly.
Use our deposit calculator to figure exactly how much benefit each option is worth; you can assess the value of more or less frequent interest payment terms, and the PIE products, comparing two situations side by side.
The latest headline rate offers are in this table. Remember, these are not where rates will settle to, just where they are at 9:00am on Tuesday, September 8, 2015.
|for a $25,000 deposit||6 mths||1 yr||18 mths||2 yrs||3 yrs||5 yrs|