NZ Savings Accounts suck, what to do ....... Is it property boom causing?

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Forums › Finance and wealth management › NZ Savings Accounts suck, what to do ....... Is it property boom causing?

TeaLeaf

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#205786 27-Nov-2016 09:15

0.25% PA what happened to 5-6% when i left this country a mere 15 years ago?

What has driven savings rates so low, is it the Auck property boom where we supposedly have a shortage yet a large percentage are overseas investors into empty homes, so of course we need more immigrants to pay the millionaire property owners baby boomer pensions ! (sarcasm).

What does an average Joe blow in NZ do with a mere $10-20k, there is nothing to invest in outside managed funds or kiwi saver that returns anything.

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#1678127 27-Nov-2016 09:19

The official cash rate is low, which is why savings returns are low. I believe that was driven by the global recession, which drives house prices up. It's probably a whole massive mix of things.

Savings accounts protect against inflation, you don't gain in real world terms. If you want your money to grow you have to invest, or use an investment fund.

Handle9

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#1678128 27-Nov-2016 09:21

The official cash rate drives both mortgage and savings interest rates. Mortgage interest rates are incredibly low, as are savings rates.

sbiddle

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#1678129 27-Nov-2016 09:25

I'm not sure where you're getting 0.25% but most banks are still offering 2.5% - 3.5% for savings accounts or term deposits.

Just be thankful that interest rates in NZ are still relatively high. In the UK 0.25% would be a truly amazing rate to get, most are below this.

None of this really has anything to do with property. Interest rates are tied to the OCR.

In terms of other investments shares have delivered pretty good returns over the past few years both in terms of growth and dividends.

alasta

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#1678135 27-Nov-2016 09:33

My retirement savings are in a balanced conservative fund that has achieved nearly 9% over the last year. Managed funds and property are doing well at the moment because low interest rates are driving capital away from bank accounts and towards those types of assets.

My spare cash is with Rabodirect, and with them I'm getting 3% subject to some conditions.

TeaLeaf

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#1678138 27-Nov-2016 09:36

sbiddle:

I'm not sure where you're getting 0.25% but most banks are still offering 2.5% - 3.5% for savings accounts or term deposits.

On every Bank website I have looked at. But yes term deposits much better. But whats odd is why does a 9 month term give you better rates than say 18 months in some banks? ie 3.6% vs 2.5%

Yes Im use to managed funds because my Aus super is in one, but it took a HUGE knock in the GFC, so the person with this money is a little worried as its their life savings and they are a bit younger.

They are also from Europe where banks in some places will charge YOU to put your money in the bank ie -0.25% interest rate ROFL.

I also thought they could consider NZ bonds, does the average person actually make any money out of bonds? I know some win a lot and some a little, but over say 2 years, would it be equal to 0.25% in the bank? I know thats hard to quantify, just looking generalised perspective.

Good thing about Bonds, no Tax.

TeaLeaf

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#1678139 27-Nov-2016 09:39

alasta:

My retirement savings are in a balanced conservative fund that has achieved nearly 9% over the last year.

I think Im on medium risk in Aus and get about 12% but of course the GFC cut me down to size.

What do you think would happen to your managed fund if the property market pops? (not a loaded question, generally interested).

Note Im not an economist, only did one paper at Uni and school.

surfisup1000

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#1678144 27-Nov-2016 09:43

TeaLeaf:

0.25% PA what happened to 5-6% when i left this country a mere 15 years ago?

What has driven savings rates so low, is it the Auck property boom where we supposedly have a shortage yet a large percentage are overseas investors into empty homes, so of course we need more immigrants to pay the millionaire property owners baby boomer pensions ! (sarcasm).

What does an average Joe blow in NZ do with a mere $10-20k, there is nothing to invest in outside managed funds or kiwi saver that returns anything.

You write this as if you have been in suspended animation for the last 15 years haha. Did you not read any news?

And, I think your facts are a bit off too.

But anyway, even a million dollars in the bank will only get you around 17k a year after tax.

While your 10-20k could have put a deposit on an auckland house 15 years back, today, it is pocket change. It sucks, but, global money printing and the GFC did this.

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alasta

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#1678146 27-Nov-2016 09:47

TeaLeaf:

alasta:

My retirement savings are in a balanced conservative fund that has achieved nearly 9% over the last year.

I think Im on medium risk in Aus and get about 12% but of course the GFC cut me down to size.

What do you think would happen to your managed fund if the property market pops? (not a loaded question, generally interested).

Note Im not an economist, only did one paper at Uni and school.

Probably not much, because my portfolio has very few assets that would be directly influenced by the residential property market. There are all sorts of things that can cause a short term decline in managed funds, but over the long term you will always win as long as you're in a fund that suits your investment horizon. Even if you had managed funds immediately prior to the '87 crash you still would have had a positive ROI five years later.

One of the reasons why I have a reasonably conservative fund is that I told my advisor that I may pull my money out and take the opportunity to buy residential property if there is a major property crash. However, those who have me as a friend on Facebook may have seen a post that I put up this morning showing a $700k three bedroom hovel in Newtown, Wellington, which I reckon would only be getting about a 2.5% ROI unless you assume that you're going to keep getting capital gains well in excess of inflation. That might happen for a few months or even years, but sooner or later some people are going to get burnt.

surfisup1000

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#1678147 27-Nov-2016 09:47

sbiddle:

None of this really has anything to do with property. Interest rates are tied to the OCR.

Common cause though, GFC resulted in global money printing, which lowered interest rates and inflated asset prices.

Rikkitic

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#1678148 27-Nov-2016 09:49

I had a similar amount I wanted to park somewhere. I couldn't find any suitable investments that interested me and I wasn't excited about minimal interest so I finally just put it into Bonus Bonds thinking it might be enough to give me a chance at the million. So far it hasn't worked out so well. I win $20 or so fairly often but the yield from minimal interest would probably have been better.

Plesse igmore amd axxept applogies in adbance fir anu typos

Fred99

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#1678168 27-Nov-2016 10:08

surfisup1000:

sbiddle:

None of this really has anything to do with property. Interest rates are tied to the OCR.

Common cause though, GFC resulted in global money printing, which lowered interest rates and inflated asset prices.

Indeed - it was even cheap housing loans in the US and the very dodgy methods used to back them which caused the GFC.

Hence the concern about the possibility of a "GFC II" if it turns out that the asset backing for housing loans are another house of cards. NZ response has been LVR controls on banks and the OBR, LVR to ensure adequate capital backing for loans made by the banks for when property prices correct, OBR to free government from the need to "print money" to prop-up the banking system if there's a run on a bank when the correction happens. There are problems with both IMO, particularly the OBR, as it's "untested" - and I suspect that if it becomes tested if/when there's a run on one bank, that'll actually cause panic and an immediate run on other banks as people won't want to lose capital to an OBR "haircut". IMO economists missed or underestimate the "human nature" impact on this. We'll see some time how clever this idea was.

Interest rates will go up. How soon and by how much is unknown. These are not normal times.

Fred99

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#1678169 27-Nov-2016 10:11

alasta:

Probably not much, because my portfolio has very few assets that would be directly influenced by the residential property market.

Everything is affected by the residential property market. It's where billions of people in the world park the majority of their wealth.

Geektastic

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#1678180 27-Nov-2016 11:07

There are European countries where you'd be paying the bank to hold your money, not getting interest...!

dafman

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#1678187 27-Nov-2016 11:33

Geektastic:

There are European countries where you'd be paying the bank to hold your money, not getting interest...!

As Fred99 noted above, these are not normal times.

billgates

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#1678228 27-Nov-2016 12:51

India has one of the highest interest rates on term deposits. Last year it got up to 12% and now it's around 7.50%. Not sure how easy it is for a Non-Indian to open an account in India but I have dual citizenship so it was relatively easy. Ofcourse inflation is higher there compared to NZ so for overseas dual citizener's it's a bonus.

http://www.bankofindia.co.in/english/RupeeTermDeposit.aspx

Do whatever you want to do man.

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