Although 2013 started up with a small flurry of mortgage rate changes, under the radar there have been some changes to term deposit rates as well.
What is interesting about the TD rates is that there is some space opening up between banks in their offers, especially at the short end.
New Zealanders have more than NZ$108 billion invested in term deposits, with almost three quarters in accounts with NZ$100,000 or more, according to Reserve Bank data as at November 30, 2012.
That still leaves NZ $29 billion invested in smaller amounts, and much of this is thought to be 'lazy money' sitting in accounts at the big four banks. It is cheap funding for them.
Savers with smaller deposits have not been the target of bank marketing for some time. In fact, most New Zealand banks are awash with liquidity and finding lending opportunities is their main problem.
Term deposit rates are being 'repressed' here as they are in most other countries.
It doesn't hep savers that the Official Cash Rate is at 2.5% because that sets market expectations and ensures the 90 day bank bill rates are at about this level for as long as market traders believe the Reserve Bank will hold its OCR setting.
Here is a list of current short term TD rate offers:
|for a $20,000 deposit||3 mths||6 mths||1 year||Special offers <1 yr|
|BNZ||3.25||3.60||4.20||4.20% for 150 days|
|Co-operative Bank||3.90||3.90||4.10||4.60% for 4 months|
|SBS / HBS||3.30||4.10||4.15|
It is the 'new' banks that are making the highest interest rate offers to savers in this space.
Heartland Bank (BBB-) has rates that reflect its transition from being a building society and over time, the expectation is that they will fall to be more like other second-tier banks.
The Co-operative Bank (BBB-) is targeting this area and offers the best rate available from a bank for a term of one year or less. In fact, apart from Heartland's offers, the 4.60% 4 month rate is better than any other bank* all the way out to a fixed three year term.
"Obviously we are wanting to stand up and be counted in a competitive sense," says Bruce McLachlan, CEO of the Co-operative bank.
"All the competitive action has been in mortgages, but we want to do something for the more modest savers out there – give them a rate that means they actually earn a good return on their savings."
"So many Banks work in the opposite way – they pay very modest amounts for smaller deposits, and reward handsomely for larger deposits. That is not always fair and can be discouraging to saving," McLachlan said.
A few sub- investment grade credit unions and finance companies also offer rates similar to the Co-op offer.
The best way to compare rate offers is to use our full-function deposit calculator, which will help you make a proper comparison after tax, and if you want to, show the benefits or otherwise of getting a PIE account. This calculator is here ».
*Two tiny specialist Indian banks, Bank of Baroda (BBB-), and Bank of India (BBB-), offer similar rates for two years fixed.