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Westpac is the latest bank to reduce its term deposit rates, cutting its local funding costs
Westpac is lowering its term deposit rates effective Friday, November 23, 2012.
The changes are as follows:
Term Deposits and Term PIE Funds:
12 month rate: decreases to 4.20% (from 4.30%)
18 month rate: decreases to 4.15% (from 4.30%)
2 year rate: decreases to 4.20% (from 4.35%)
3 year rate: decreases to 4.40% (from 4.50%)
Term Deposit Monthly Income Option:
SuperGold 12 month special rate decreases to 4.20% (from 4.30%)
SuperGold 2 year special rate decreases to 4.20% (from 4.35%)
Wholesale rates have been falling recently, although the declines are not large.
Competition in the mortgage market is intense, requiring banks to match low-ball rate offers, and this is affecting their margins.
As most banks now source much more of their funding locally, they "need" to reduce the cost of their funds from the local retail markets to afford being in the aggressive mortgage market.
The mortgage market competition is intense. The RBNZ data shows that the overall market is not growing very strongly. So for banks, winning new mortgage business is pretty much a zero-sum game.
Savers are paying the price.
And, because international money markets are awash in very cheap [printed] funds, savers have few alternative options with offshore opportunities. They are in no position to utilise a carry trade strategy.
Banks rely on savers being resigned to such changes - they know that their 'replicating portfolio' can be relied on to stay loyal.
These latest reductions move Westpac down to the levels announced by ANZ on November 15, although for the one year term Westpac is still pitching its rate above ANZ:
|for one year ...||Minimum||Rate|
Smaller banks offer similar rates for the one year term, with the top rate offer being from RaboDirect. (For monthly interest however, the RaboDirect offer is lower at 4.31%.)
|SBS / HBS||5,000||4.30%|
Investors should be clear about when interest is earned and paid. This can range from 'monthly' through to 'at maturity', and for larger deposits and longer terms this can make a material difference to your actual earnings. Details on the codes used on our tables can he found here ».
The best way to work out the dollar amount of these aspects is to use our comprehensive term deposit calculator, here »