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
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
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.
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