Credit unions merge and drop fixed rates

NZCU North will no longer offer fixed interest rates on home loans and is to merge with First Credit Union.

Tuesday, October 23rd 2012, 6:26AM

by Susan Edmunds

Spokeswoman Rhian Hodgetts said the loan rate move would bring NZCU more closely into alignment with First Credit Union. She said borrowers currently on fixed rates would not be affected. “For borrowers on a fixed rate, we will honour that contract.”

NZCU North’s new floating rate will be 6.45%. (To see how this compares with other lenders use our full table of rates)

NZCU North acting chief executive Peter Isles said the merger would likely happen about December 1, after a stand down period of six weeks.

He said it made sense because it was too confusing to have both an NZCU and First Union branch in many centres.
Isles said the move away from fixed interest rates was because of the size of the operation. “We are not big enough to offer fixed loans with any certainty.”

Mortgage borrowing is only 48% of the NZCU North lending book and Isles said he had wanted to reduce it to 40%.

NZCU North recently had its BB financial strength rating affirmed by Standard and Poors, but with a negative outlook. The rating firm’s report noted that the more profitable personal lending sector was down 22% in 2012, after a 34% drop in 2011.

The BB rating means that the organisation is not so vulnerable in the near-term but faces major ongoing uncertainties. The negative listing indicates that the ranking could be reviewed down within the next three months.

NZCU North is a mutual organisation with more than 32,000 customers. It has been operating for 57 years around the central North Island, most specifically in the Bay of Plenty area. Its sister organisation, NZCU South announced earlier this year it would close five branches in the South Island.

First Credit Union operates in the same area as NZCU North, with a focus on Hamilton, Te Aroha and Tauranga. It was New Zealand’s first credit union, started in 1955 as St Mary’s Credit Union. In 1992, it became Credit Union Hamilton and in 2007 became First Credit Union.

Isles said fees were one thing the two credit unions would need to discuss before they combined forces.

“They have quite a high fee structure and we don’t have any. We have to work through these issues.”

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