Kiwibank catches up to recent term deposit rate moves by rivals, but its unchanged six month 3.75% rate is still the market leader for this term

Earlier on Saturday, we reported that Kiwibank had increased its fixed rate mortgage interest rates, saying at the time "there were no equivalent term deposit rate changes made at this time." This turns out not to be correct.

We later got notification that Kiwibank has changed term deposit rates.

Kiwibank's three month rate has been raised by +20 bps to 2.70% and the 100 day rate is also up by the same amount to 2.75%.

The bank has raised their five month rate by +20 bps also to 3.20% and their 200 day rate by +15 bps to 3.25%.

Kiwibank's nine month rate is also up by +15 bps, now at 3.35%.

For two years, the bank's interest-at-maturity rate has been raised by +40 bps to 3.80% while the annual interest paid rate is 3.70%

The hike for three years is +30 bps to 3.90% (IAM) and 3.70% for the interim interest basis.

For four years, Kiwibank's IAM rate has gone up +40% to 4.10%, while the interim interest rate is now 3.75%.

And for five years, Kiwibank's IAM rate is 4.20%, and the interim interest rate is 3.70%.

These term deposit changes are effective Monday, February 6, 2017.

They made similar changes to their term PIE rates up to a nine month term.

As at September 30, 2016, Kiwibank had a bit more than $10 bln in customer term deposits, another $3 bln in "demand deposits bearing interest", and a further $1.5 bln in deposits that don't earn any interest. All up Kiwibank has almost $15 bln in total deposits from customers.

A summary setting out some of the Kiwibank changes for the same time periods reveals this:

Term deposits 6-Feb-17
change
  Home Loans 6-Feb-17
change
  %     %
At call n.c.   Floating n.c.
30 days n.c.      
3 months + 0.20      
6 months n.c.   6 months n.c.
9 months + 0.15      
1 year n.c.   1 year +0.10
2 years +0.40   2 years +0.14
3 years +0.30   3 years +0.20
4 years +0.40   4 years +0.10
5 years +0.35   5 years +0.20

In this case, it seems savers got larger rises than borrowers in this rate change cycle, which is somewhat unusual.

In fact, Kiwibank's unchanged 6 month rate of 3.75% is now the highest carded rate in the market for terms between five and seven months.

But apart from that, even with these higher rates, the other terms do not stand out as market-leading. The higher rate changes are more about catching up with the market.

For higher rates still, you need to asses the offers of institutions with a lower credit rating.

As we have earlier noted, savers may wish to think through the wisdom of locking up of funds for longer terms in what seems to be a turning rate environment. This situation should have savers thinking through the risk/reward scenarios.

Use our deposit calculator to figure exactly how much benefit each option is worth; you can assess the value of more or less frequent interest payment terms, and the PIE products, comparing two situations side by side.

All carded, or advertised, term deposit rates for all institutions for terms less than one year are here, and for terms one-to-five years are here.

Term PIE rates are here.

The latest headline rate offers are in this table.

for a $25,000 deposit Rating 3/4 mths 5/6/7 mths 8/9 mths 1 yr 18 mths 2 yrs 3 yrs
Main banks                
AA- 3.00 3.30 3.60 3.35 3.60 3.80 3.90
ASB AA- 3.00 3.65 3.35 3.20 3.75 3.65 3.80
AA- 3.00 3.30 3.68 3.25 3.60 3.75 3.80
Kiwibank A+ 3.00 3.75 3.35 3.65   3.80 3.90
Westpac AA- 3.00 3.50 3.25 3.40 3.70 3.70 3.80
Other banks                
BBB 2.95 3.40 3.70 3.70 3.75 3.85 4.10
Heartland Bank BBB 3.10 3.30 3.70 3.40 3.40 3.40 3.70
HSBC Premier AA- 2.50 2.80 2.90 2.90   2.90 2.95
ICBC A 3.05 3.35 3.65 3.45 3.65 3.75 3.85
RaboDirect A 2.85 3.40 3.35 3.40 3.40 3.45 3.80
RaboDirect BBB 2.75 3.55 3.85 3.60 3.70 3.80 4.00
A- 3.00 3.30 3.75 3.50 3.70 3.80 4.00
Selected fincos                
F&P Finance BB* 3.10 3.80 4.00 4.10 4.25 4.35 4.50
RaboDirect BBB 3.40 3.95 4.15 4.65 4.85 5.00 5.40
RaboDirect BBB 3.00 3.50 3.75 3.80 3.75 3.75 3.85
  * = the only credit rating in this review that is not investment grade.  

Our unique term deposit calculator can help quantify what each offer will net you.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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