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Mother in law’s guide: Best deposits up to 1 year
July 15th, 2008(Updated July 14. I’ve changed my recommendation because Kiwibank has dropped its 5 month special of 8.85% to 8.6%, meaning ASB’s 8.7% for 9 months is the best rate below one year.)
The following article is not financial advice for everyone. However, it is what I’d tell my mother-in-law about where to put any spare money for the short term. It is written as my view of the best call accounts.
I’ve also written guides for the best call account , the best term deposit (or debenture) for over 1 year and the best PIE accounts.
I’d encourage any reader to have a look at the rates table referred to for a comprehensive view at what’s around. Seriously. Don’t take my word for it. Everyone is different and has their own needs and risk appetites. This is written for my retired mother in law (and father-in-law) who I want to keep happy, both from a risk and return point of view. They, of course, want the highest return for the lowest risk.
This website does take advertising from deposit takers and lenders, but this piece is not influenced by that advertising in any way. My inlaw’s long term goodwill is more important to me than any advertiser’s business and, of course, I value my editorial independence very highly. This post will be updated whenever there are any changes to rates.
Best Deposit Rate up to 1 year (See full rates table)
It pays to watch our rates table for this one. Banks offer short term ’specials’ all the time and the length of the term is also important depending on your own needs. If you’ve got a deal to settle in 3 months there’s no point in investing in a 6 month term deposit.
The best offer from a building society or credit union is Credit Union Taranaki with 9.55% for 9 months with a minimum NZ$500. It has no credit rating.
The highest rate offered by a AA rated bank is ASB’s 8.7% for 9 months with a minimum of NZ$10,000 and where interest is paid on maturity (ZZ). The AAA-rated Raboplus’ best rate is 8.45% for 3 months and 6 months with a minimum of NZ$1,000 and where interest is paid on maturity.
ANZ’s best rate is 8.5% for 100 days with a minimum NZ$10,000 and interest paid on maturity. National Bank’s best rate is 8.6% for a minimum of NZ10,000 for 3 months and where interest is paid on maturity. Westpac’s best rate is a special rate of 8.5% for 6 months for a minimum of NZ$10,000 where interest is paid on maturity.
The best rates offered by finance companies look very good, but the risk element is crucial here. The highest rate is 10.5% for 9 months from Mutual Finance for a minimum of NZ$1,000 and where interest is paid quarterly. This Pakuranga-based finance company has NZ$15 million in assets, has no credit rating and has more than 80% of its loans in real estate or property development. It’s not for my mother-in-law, but others may have stronger stomachs, although I would argue the returns should be much higher than 10.5% to match the risk.
The next best is from a much bigger finance company, Strategic Finance, which is offering 10.10% for a 10 month deposit. Wellington-based Strategic has NZ$661 million of assets, but 99% of its loans are in real estate and property developments and one loan to a resort in Fiji is worth more than 60% of its equity. It has no credit rating from Standard and Poor’s but has a B1 investment grade rating from a little used credit rater called Axis Ratings.
Hanover Finance, which is also heavily exposed to real estate development, is offering 9.55% for a minimum NZ$10,000 investment for 9 months. Auckland-based Hanover has a BB plus rating from Fitch, which is not regarded as investment grade.
Marac Finance has an investment grade credit rating of BBB minus and offers 9.25% for both 6 and 9 months term deposits with a minimum NZ$1,000 investment. UDC, which is AA rated by Standard and Poor’s and is owned by ANZ, offers 8.95% for deposits of over NZ$100,000 for 3 month to 6 month terms.
Read the 5 Survivability factors report for more information on finance companies generally.
Recommendation: ASB’s 8.7% for 9 months is the best around at the moment from a AA rated bank (July 14) for up to 12 months. The best shorter term deal is Kiwibank on 8.6% for 5 months.
If you think, as most economists and the RBNZ do, that interest rates will fall substantially over the next 6-12 months, then the 9 month deal may be more sensible. My view though is that if interest rates fall, it may not be until quite late in the year and by not much because we have an inflation problem that needs fixing with high interest rates.
Tags: ANZ, ASB, Kiwibank, Mother in law's guide, National Bank, Raboplus, Term Deposits, Westpac
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