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View Full Version : Interest rates...a tale of two outcomes



Stranger_Danger
17-02-2009, 01:58 PM
I was down at the bank today and was waiting in a decent sized queue.

Off at a side table, a little old white haired lady was talking to a fairly agitated banker about her term deposit.

It was up for renewal, and he was pretty much just getting her to roll it over without thought, and got annoyed when she delayed.

She wasn't all that sharp, being, I guess, 85 or so.

She had the bit of paper from last time when she got 9% and couldn't understand why he was talking about 4%.

She seemed to be saying "why can't I just keep things the way they were?". It genuinely didn't make sense to her - she wanted to keep her money parked, just like before. She'd saved it. Why would she get half the income from it?

They were still battling it out when I left.

In the bank, too, were your cliche "power couple". Late 20's, expensively dressed, and with a chip on the shoulder and a sense of entitlement.

They were arguing - while waiting - about break fees and floating rates. Inbetween hearing how the bank were "criminals" and how you should just be able to break a fixed term, the wife was talking the husband into the extra holidays she was already planning with the savings they would receive from a lower rate.

It was obvious from the chatter that they didn't have the break fee in cash. Despite two - I'm guessing - decent incomes, they clearly didn't have 10 cents of actual savings.

Their existence had clearly been based on consumption, expectation and a belief that if things got bad, "nanny state" or similar would bail them out.

And it has.

They may as well have asked for the recession - after all, in their world it means cheaper mall clothes and more holidays.

But who cries for the little old lady?

Snapper
17-02-2009, 04:15 PM
The little old lady has been receiving some of the highest interest rates in the western world for some time now. If she was in the US or Japan she would be lucky to get 2%.

Dr_Who
17-02-2009, 05:10 PM
The smartly dressed young couple you mention is all too common sight where I live. All blinged up and no cash in the bank. Nice Porsche (financed) but no money left for insurance or gas. Oh dear!

Mysterybox
17-02-2009, 11:01 PM
Yeah sorry about Gen Y, apparently we can be like that. But there are some fine examples around here of those who have their heads on straight.

beacon
18-02-2009, 09:38 AM
Well presented SD. Apparently the little old ladies of the world wouldn't be getting their 9%s unless the youngsters continue to consume. And consume they will. The genie is out of the bottle now. Ah! the freedom. No more bondage and watching the world pass you by ... The old ladies can rest assured that the good old days will be back soon enough.

whatsup
18-02-2009, 11:26 AM
Story from the --- a bank in Remuera, Auckland which in the last recession 87-91 had the destinction of having the highest in both categories for the whole of N Z of a) deposits(made by the over 60's-),mostly lady customers and b) the highest % of over drawn accounts, again the under 50's.

paul_nz
18-02-2009, 12:26 PM
While interesting to read, without talking to the 'little old white headed lady', or the 'power couple' and researching their financial situations, your anecdote is just guessing.

How many couples could be expected to have a break fee in cash? Surely if they were sensible they'd have put that cash against the mortgage earlier?

The lower returns for the little old lady may be equally balanced against the expected lower inflation environment. Or if returns are lower she may decide to use some of that savings for holidays for herself....

Do have to admit though that I'm getting a bit tired of the 'banks are criminals' line of thinking, since that's the prevalent attitude where I work, and boy do people feel the need to constantly repeat it ...

Jess9
18-02-2009, 01:16 PM
I wonder whether banks should be passing more of the OCR cuts through to their floating customers. I thought a margin of up to 1-2% was the norm. Shouldn't floating rates be around 5.5% today??

whatsup
18-02-2009, 01:45 PM
Jess, This is how bank interest rate works, take the OCR currently 3.5% add bank margin of 1.50% min then add customer risk rate currently about 2% min which adds up to 7%, but if its for housing market share comes into play where the bank will trim its margin.
Credit card rates are different as they are unsecurred loans and can be as high as the bank likes.

POSSUM THE CAT
18-02-2009, 02:22 PM
Whatsup you forgot to add in the percentage they pay the Govt. for the guarantee., and also not all money is obtained at the official cash rate.

paul29
18-02-2009, 07:25 PM
I work for a company that does small loans $1000 --$5000 unsecurred loans at 20% they pay 10% to investors and have had no defaults over 4 years on loans The little old lady can shop around cause there are good companys out there that are paying good interest

Jess9
19-02-2009, 09:38 AM
http://www.stuff.co.nz/4852664a13.html

BNZ Profits up.