While changes to home loan interest rates garner some headlines, there have also been a small but steady stream of term deposit rate changes from banks and other non-bank deposit takers recently.
The latest is from non-bank deposit taker (NBDT) and large credit union NZCU Baywide which has raised a number of key deposit rates, including its on-call rate ($20,000+) to 3.15%. Its one year rate is now 4.00%.
Over the past three months, readers of interest.co.nz have been checking out our term deposit rate pages at a 15% higher level than the home loan rate pages. This is a sharp turnaround from the data we saw over the previous two years.
Term deposit rates of 4% and above are becoming more frequent. And except for the very shortest terms, average bank term deposit rates are heading up again.
4%-plus rates are now offered by most banks, even the main banks, for terms of four or five years. But BNZ is now unique as a main bank offering 4.00% for three years, matching their smaller rivals at SBS Bank and TSB Bank. The Co-operative Bank has gone slightly higher at 4.05% for three years.
A full three year commitment is still too long for most savers, and most money is at one year or shorter.
Four percent is also available for a one year term from Liberty Finance, a non-bank deposit taker with an investment grade credit rating.
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.
In fact, RBNZ Governor Wheeler today said he is as likely to hike official rates next as lower them.
Wholesale swap rates have not been moving much for shorter terms, but are rising for terms longer than 2 years. However banks are mitigating some of this rise in wholesale funding cost by paying lower spread premiums.
Wholesale rates may be options for banks, but they are not for savers. But you can access bond rates on the secondary market which offer liquidity in a way fixed term deposit commitments don't. But for that flexibility, you do concede retail rate levels. Depending on how you assess risk, you may well judge the flexibility to get your capital returned as more important the yield return. That is up to your personal tolerance for risk.
The benchmark 'risk free' return for savers are AAA Kiwi Bonds and they return just 1.75% for terms of six months and one year, 2.00% for two years, and 2.25% for four years. Any rate above that is a premium for risk. Credit ratings are one way to assess risk.
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.
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|
|* = 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.
NBDT = non-bank deposit taker