INTEREST RATES

Evening Post, Volume CXV, Issue 74, 29 March 1933, Page 7

INTEREST RATES

REDUCTIONS MADE

ISSUE OF REGULATIONS

SAVINGS BANK DEPOSITS

Regulations providing for reductions of the interest rates,paid in respect of deposits in tho Common Fund of the Public Trust, in building and investment societies, local authorities, and savings banks were published in a supplement to tho Gazette today. The regulations givo effect to the interest-reduction proposals .which woro outlined by tho Minister of Finance (tho Kt. Hon. J. G. Coates) during the latter part jof the session. v In explaining the regulations, Mr. Coates.said, that tho intention of the banks to reduce overdraft rates for best accounts to 5 per cent, had already been announced,- and this reduction would be made, as from May 1 next. It now remained for tho Government to take action to give, effect to the balance of tho interest reduction programme as previously outlined iv the House. ' - • "Accordingly," said the Minister, "steps are- now being taken to reduce the Post Office Savings Bank rate to 3 per cent, as from April 1. Tho present rate is 3} per cent, on deposits up to £500 and $J'per cent, on deposits above that amount up to tho limit-of £2000. From April 1, however, all 'deposits will bear interest at 3"percent. PROTECTING SAVINGS BANKS. "Concurrently with the reduction in the Post Office Savings Bank rate, an Order in Council is being issued reducing the rate for the trustee savings banks', to the same level—namely, 3 per cent, as from April 1 next. As the trustee savings bank rate is at present on the same level as the Post Office, this Order in Council . does no more than preserve- tho existing "relative position. . , "In reducing tho ' rates for savings banks, the Government must in equity take steps to see that they do not suf.fer as' a result of such action. Accordingly, it is necessary to make a further reduction in the maximum rates of interest that may be paid by building societies and investment companies; otherwise funds would tend to flow from tho savings banks to these institutions. ■ - J "It is realised, however, that building societies and investment companies are affected by the mortgagors relief legislation, and it is not desired to increase their* difficulties. Accordingly, the reduction now being made will apply to new deposits only; that is to aay, all renewals of deposits at present held by these institutions may bo effected at rates within the maxima fixed by- the existing Orders in Council. For new deposits, however, the maximum rates that may be paid have been lowered by i per cent. ' Accordingly, under theOrder in Council now being issued the maximum rates for* new moneys will be as follows:-— ■ ":■■'.' ' Call ...... 2s.per cent. 3 months '. 3 "■ " v 6 months ...... 3J " " ; 12 months ...... 3J " " 2 years and over 4 " " These new rates will operate as from April 1. The rates are -i per cent, above the rdeposit rates of the banks, which, it will bo remembered, were reduced in December last. LOCAL BODY DEPOSITS. "Up to tho present no Order-in-Cou.il-cil has been issued limiting the rates of interest, that may be paid by local bodies for deposits, but in fairness to other institutions action is novr being taken in this .direction, and as from April 1 next local bodies for the respective periods concerned : will be. restricted to rates of interest not exceeding those prescribed for new moneys accepted^ by building societies and investment companies. That is to'say, in go far as new moneys aro concerned local bodies and investment companies are placed on the samef level, but as local authorities cannot accept deposits for any period in excess of a year themaximum rate that may be paid by any such authority is 3} per cent., the same as is fixed for building societies and investment companies for periods of from 6 to, 12 months. "Finally, steps have boon taken to reduce the rate oi interest that may be paid by the Public Trustee on investments in his Common-Fund. "This rate, whiph is', at .present, 4 per cent., is being reduced to 34 per cent. as from April 1 next. At the'same time, the maximum rate that may bo paid by him on moneys hereafter accepted by him under investment agencies has also been •limited to 3i per cent. In respect of investments already held under such agencies, 'a. further' 5 per cent,' reduction in the amount of the interest payable is being made with a minimum of 4 per cent." ,