Unsecured personal loan rates rise in face of OCR cut

Despite a number of OCR cuts, the majority of personal loan rates have not followed suit…

The Reserve Bank of New Zealand has cut the OCR four times since December 2015 – each time by 25 basis points. The current rate is at a record-low 1.75%, with RBNZ attempting to cool the overheated property market and to stimulate inflation.

But, despite these OCR cuts, personal loan providers have not made a mad dash to the bottom with their rates. In fact, interest rates have even increased in seven unsecured loan products, according to CANSTAR’s database. This shows how important it is to compare the personal loan market before signing on the dotted line.

Compare Personal Loan Products

In 2016, CANSTAR rated 30 personal loan products – 20 unsecured and 11 secured. Out of these 30 products, 23 were also included in the 2015 ratings report. This year, four providers picked up 5-star ratings: Harmoney, TSB Bank, The Co-operative Bank and NZCU Baywide.

Let’s have a closer look at changes in personal loan rates across the providers.

Movers and shakers in unsecured personal loans

unsecured personal loans

When it comes to unsecured personal loans, five of the personal loan products – from providers Westpac, ASB, The Co-operative and BNZ – are at the same rate in the 2016 report as they are at the time of the 2015 star ratings release.

But seven of the 19 unsecured personal loan products have increased in the past year, including four of Harmoney’s products. However, as you would expect, interest rates increase significantly for loans targeted at customers with lower credit ratings, as the lender is taking on a greater risk.

On the flipside, Harmoney currently has the lowest rate for unsecured loans, sitting at 11.17% for its Unsecured loan for customers with an A credit rating, according to CANSTAR’s 2016 ratings report.

Kiwibank has had a massive drop from 2015 to 2016 – from 19.38% to 16.95% – bringing it closer in line with personal loan rates from the other big banks, according to CANSTAR’s report.

Here’s how unsecured personal loan rates have changed from 1 October 2015 to 1 October 2016, based on a $15,000 loan over three years:

 

Unsecured (%) Secured (%)
Average 16.14 11.87
Min 9.99 8.90
Max 28.70 13.95
Source: www.canstar.com.au
Rates based on loan amount of $15,000 over 3 Years – Data as at 01/10/2016

 

Unsecured (%) Secured (%)
Average 15.64 12.08
Min 9.99 9.90
Max 22.96 13.95
Source: www.canstar.com.au
Rates based on loan amount of $15,000 over 3 Years – Data as at 1/10/2015

Here’s a full breakdown of the rate changes for unsecured personal loans, comparing CANSTAR’s 2015 and 2016 star ratings records.

Provider & product 2015 rate (%) 2016 rate (%) Change (%)
Harmoney NZ Unsecured Personal Loan A credit rating 10.73 11.17 +0.44%
NZCU Baywide – Orange 11.90 new product
TSB Bank Personal Loan Unsecured 13.79 12.84 -0.95%
NZCU Baywide Unsecured-Yellow 15.90 new product
Harmoney Bank Unsecured Personal Loan B credit rating 14.17 14.66 +0.49%
Westpac Personal Loan Unsecured 17.20 17.20 no change
ASB Bank Debt Consolidation 15.95 15.95 no change
The Co-operative Bank Personal Loan Unsecured 17.0 17 no change
BNZ Advanced Personal Loan 17.85 17.85 no change
NZCU Baywide Unsecured – Green 19.90 new product
Kiwibank – Personal Loan 19.38 16.95 -2.43
ASB Bank Personal Loan Unsecured 17.95 17.95 no change
ANZ Bank Fixed Personal Loan 17.82 17.95 +0.13
Gem Debt Consolidation Loan 22.76 17.99 -4.77
NZCU Baywide – Unsecured- Blue 23.90 new product
Harmoney Unsecured Personal Loan C Credit Rating 18.59 20.49 +1.9
Gem Debt Consolidation Loan 22.76 22.99 +0.23%
Harmoney Unsecured Personal Loan D Credit Rating 21.37 25.75 +4.38
Harmoney Unsecured Personal Loan E Credit Rating 27.51 33.78 +6.27

 

No increases in secured personal loan rates

secure personal loan rates

The rates picture for secured personal loans is in stark contrast to movements with unsecured loans. In fact, all of the secured personal loan product rates on CANSTAR’s database in 2015 and 2016 have either stayed the same or decreased. If you’re in the market for a loan, rates for secured personal loans drop as low as 8.90%. But it’s important to keep in mind that the risk is a lot greater to the customer with secured personal loans, because you are borrowing against an asset, a vehicle or property in most cases.

Three providers – TSB Bank, Kiwibank and Gem – have all cut their rates, showing some competition in the secured personal loan space.

Here’s how secured personal loan rates have changed from 1 October 2015 to 1 October 2016, based on a $15,000 loan over three years:

Here’s a full breakdown of the rate changes for secured personal loans, comparing CANSTAR’s 2015 and 2016 star ratings records.

Provider & product 2015 rate (%) 2016 rate (%) Change (%)
NZCU Baywide – Secured Orange 9.65 New product
TSB Bank Personal Loan Secured 11.79 10.84 -0.95
The Co-operative Bank Personal Loan Secured 11.73 11.73 No change
NZCU Baywide Secured-Yellow 13.90 New product
Kiwibank Vehicle Loan 15.99 13.24 -2.75
ASB Bank Personal Loan Secured 12.95 12.95 No change
Gem Car Loan Secured 18.69 12.99 -5.7
Westpac Personal Loan Secured 16.45 16.45 No change
The Co-operative Bank Vehicle Loan 15.45 15.45 No change
NZCU Baywide Secured-Green 17.90 New product
NZCU Baywide Secured-Blue 21.90 New product

 

Overall, seven unsecured personal loan products have increased over the past year, while all secured products on CANSTAR’s database have either stayed the same or decreased.

Here’s an overview of how unsecured and secured loans have changed over the past year:

But, while low rates are appealing, don’t forget to do your homework on any associated fees or the risk you take on with a loan.

Not sure where to start? Don’t forget to check out CANSTAR’s 2016 personal loan report, and comparison table where we’ve crunched the numbers on personal loan options.

Compare Personal Loan Products

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