ANZ raises business borrowing rates

New Zealand's largest bank 'moves early' on interest rates for its business clients, raising them by 40 basis points

Business / news

New Zealand's largest bank 'moves early' on interest rates for its business clients, raising them by 40 basis points

31st Jan 23, 9:16am by David Chaston

We are still more than three weeks away from the next Reserve Bank (RBNZ) Monetary Policy review on February 23.

Financial markets are paring back their assumptions of the rate rise expected then, from 75 basis points, which was assumed in early January, to 50 bps now.

That would take the Official Cash Rate to 4.75% from 4.25%, if that is in fact how the RBNZ sees it in three weeks.

However, NZ's largest bank, and second largest business bank, is pushing ahead with an 'early' rate rise for its business customers, raising its key lending base rates by 40 bps Monday.

It has advised these changes.

Business Bank Indicator Rate:

Old rate	New rate	Change
%	%	bps
12.25	12.65	+40

Agri Current Account:

Old rate	New rate	Change
%	%	bps
10.45	10.85	+40

Business Overdraft:

Old rate	New rate	Change
%	%	bps
14.25	14.65	+40

If you are a homeowner, you will recognise you are getting a very much better deal than these rates. But you will also need to understand that these are base rates. The bank will add a risk margin on top of these base rates.

And in addition, very few business borrowers will get an equivalent loan-to-value ratio of anything close to 80%. For businesses, it is likely these levels will max out at 66% and mostly be at 50%.

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21 Comments

by bw | 31st Jan 23, 9:29am 1675110597

12.65% for business borrowing? A business - isn't that what the Property Investment Sector calls itself when it cries for business rules to be applied across the board, and have interest cost deductibility etc restored?

Looks easy to me. Restore Interest Deductibility and apply the Business Interest rate of 12.65% to all borrowings that are not for a primary place of residence. "But that will push up rents!" will be the response. A tenant can only pay what they can pay, then they move and leave the place empty. A couple of months of $0 income searching for a replacement tenant at 12.65% should be a sobering enough thought to temper rent rises.

by Noncents | 31st Jan 23, 9:23am 1675110230

Charge them GST too, there is a lot of moaning about how they "provide a service".

by nguturoa | 31st Jan 23, 9:24am 1675110259

Yes and tax everyone on realised profits. No accounting cheat sheets.

by Nzdan | 31st Jan 23, 10:07am 1675112847

Well yeah they call themselves a business for tax purposes, but IRD actually defines them as an individual so should never have business related tax mechanisms. They also call themselves "mom and pop" if the tenant wants to hang a picture/get a pet, or if they need to take the heat off the social harm they cause.

Individual
1. This includes individual customers receiving income from business (eg, rental property, shares) but not registered for GST or PAYE.

https://www.ird.govt.nz/glossary-source

by dumbthoughts | 31st Jan 23, 11:07am 1675116426

Am I an idiot for thinking that this would be the simplest change to make to "fix" the impact of property speculators on the market?

Legislate that all borrowing for the purchase of investment property is effectively a business, so you have to pay business rates.

As it stands, there's little wonder that buying up property is more appealing than actually starting a business.

by Te Kooti | 31st Jan 23, 11:37am 1675118226

You're not in finance I take it BW. The rate of 12.65% is unsecured, comparable to a credit card. Small businesses that use residential property as collateral will borrow at mortgage like rates. Those that secure with hard assets like yellow machinery will be somewhere in the middle.

Nice rant though.

by Llama_360 | 31st Jan 23, 12:00pm 1675119623

Interesting. What size of unsecured loans are banks generally willing to make to businesses?

by Sluggy | 31st Jan 23, 10:01pm 1675155703

That would be a big fat zero in my experience. When I started out they wouldn't even give me a business credit card.

by Chaosinflesh | 31st Jan 23, 12:20pm 1675120817

That's weird. Last time I went for a business loan it was still required to be secured - either against property or TD.

by Te Kooti | 31st Jan 23, 12:45pm 1675122311

Secured over the general assets of the business. If anyone is paying 12.65% and using their house or term deposits as collateral, then they need a financial advisor asap.

by Sluggy | 31st Jan 23, 9:26am 1675110392

It is ridiculous. Surely there is room for community based banks that support local business rather than actively bring them to their knees.

As the above commenter mentioned, these should be the rates for all business, including the rental one.

by kwbrn | 31st Jan 23, 10:49am 1675115387

The rates reflect the risk. Bond rates are much lower.

by Pa1nter | 31st Jan 23, 10:57am 1675115879

Ayup. Lending for homes is lower risk, because you have the home as collateral.

Business lending is cheaper if the business owns solid recoverable assets. Lending against turnover or inventory is a risky proposition.

by Sluggy | 31st Jan 23, 9:59pm 1675155574

I've got 2.4m in unencumbered stock, still struggle to get reasonable rates.

by Pa1nter | 31st Jan 23, 10:07pm 1675156070

Cost or retail and how quickly/easily could someone liquidate the whole 2.4 (i.e how long would it take them to sell that through and what would the liquidation process cost)?

I don't know what it is but unless it's something like cars you'd be struggling to have someone value the stock at 10-20 cents in the dollar for lending purposes.

by Sluggy | 1st Feb 23, 7:09am 1675188569

Cost. The business financials are stellar, but I dont own a house, this is the biggest issue with this country, everything is wrapped around property.

by fender bender | 1st Feb 23, 7:41am 1675190474

New Zealand is not really a country where first generation business owners get any breaks. Particularly if you have started from scratch with no family financial backing. Owning a house and all business assets and premises is a long road for most traditional business owners.

by 21Trillion | 31st Jan 23, 12:48pm 1675122518

Banking in NZ is a monopoly.

by fender bender | 31st Jan 23, 11:03am 1675116181

Don't forget business rates for insurance, ACC & Council Rates too, and liability for injury that is inflicted on the property.

by murray86 | 31st Jan 23, 11:04am 1675116270

Banks supporting economic development in NZ - Yeah right!

by Averageman | 31st Jan 23, 4:03pm 1675134209

Banks looking to be banking on further changes for the worse, and all but cutting off these types of loans. What to they know that we don't...

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