Banks hike loan fees 25 per cent

The cost of taking out a personal loan has risen by a quarter at two of the largest retail banks.

Jointly owned ANZ and National banks will increase application fees for personal loans from $200 to $250 on January 23.

The hike makes the initial cost of taking out a personal loan the same at all of New Zealand's major banks - including ASB, Kiwibank, Westpac and BNZ.

A spokesman for ANZ and National said the fee was changed to reflect ''wider market conditions'' and was in line with similar fees charged by its competitors.

The new fees related only to new and additional personal lending and would not affect existing loans.

The announcement follows a year of strong New Zealand profit announcements by the Australian-owned banks, prompting Consumer NZ chief executive Sue Chetwin to urge would-be borrowers to shop around for the best loan rates.

Personal loans are often used to pay for cars, holidays, appliances and other personal items at interest rates ranging from 13.1 per cent to 18.95 per cent, depending on the bank and whether the loan is secured or unsecured.

A Consumer review last year found credit unions generally charged lower application fees for personal loans than mainstream banks, however lending criteria also varied.

As of yesterday New Zealand Credit Union Auckland's advertised personal loan processing fee was $50 for loans under $2,000 and $125 for loans $2,000 and over, while The Co-operative Bank (formerly PSIS) charged $200.

ANZ, the country's biggest bank and owner of the National Bank black horse logo, reported net profit in New Zealand of $1.08b for the year to September, up 25 per cent on the previous year - an improvement it attributed mainly to a big drop in provisions for bad debts.

In August, Reserve Bank Governor Alan Bollard told a NZ Shareholders Association conference that the high rates of return banks had enjoyed over the past decade were unlikely to be sustained if householders and businesses chose to curtail debt and save more.

While profits were strong, work carried out by the Reserve Bank suggested margins charged on financial products such as residential mortgages were in line with those charged in other countries, supporting the view that strong profits were due to low operating costs, he said.

- © Fairfax NZ News