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deposit rates

Rate Update: UDC trumps big banks

Competition for deposits has meant that upward adjustment in rates are continuing despite the market having pared down expectations of any further rate hikes by the Reserve Bank in 2010.

Monday, 4 October 2010

Last week, UDC Finance made some significant increases in interest rates up to one year term.  The hikes are likely a reflection of the pressure the company faces from finance companies that have an extended deposit guarantee from the government, and may be easily attracting inflows.

Most of the company's new rates are now higher than the term deposit rate offered by the large banks. But they are still lower than some of the attractive rates offered by finance companies with government's guarantee.

UDC has the best rating among all finance companies at AA with a stable outlook.

UDC has increased the one-year rate by 90 basis points, now offering 5.70%. This compares with maximum rate of 5.30% offered by the major banks. Among the guaranteed finance companies, Equitable Mortgages is offering an attractive 6.50% on guaranteed debentures.

UDC raised nine-month term rate by a whopping 135 basis points, but the new rate of 5.25% isn't much higher than 5.10% offering by some of the major banks.

Among other finance companies, FE Investments increased rates on nine, 12 and 18-month terms as the company is now desperately seeking funds as the deadline for the expiry of the government's guarantee approaches. At 10% for a 12-month term, FE is offering the highest rate in the market, but it has no extended guarantee from the government.

Meanwhile, Fisher & Paykel Finance made some downward adjustments to non-guaranteed debenture rates, thus paring down the big premium it offered earlier.




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