Down, down - more rate cuts for savers

The trend of rate reductions for savers now extends to on-call and savings accounts, more banks drop TD and PIE rates

17th May 13, 11:51am by David Chaston

Fourteen of 15 changes to TD and savings rates this week were reductions

This week Call and term deposit rates continued their gradual decline.

(Updated with a Monday morning rate cut by Kiwibank.)

Fourteen of fifteen changes were reductions, all 0.25% or less.

The only rise was from HSBC who increased their one year TD rate from 3.85% to 3.90%.

However HSBC also reduced their 18 month TD rate to 4.00% from 4.05% at the same time.

RaboDirect and TSB also reduced term deposit rates, and with RaboDirect making similar reductions for the same terms in their Term PIE products.

For the first time in a while, savings and call rates have started to fall too.

ASB reduced its Fastsaver rate by 0.25% to 2.75%, BNZ reduced its Personal OnCall rate by 0.20% to 2.80%, and SBS reduced its iSave rate by 0.2% as well, down to 3.20%.

Rabo and SBS also reduced Cash PIE rates.

You can find a comprehensive list of term deposit rates for all institutions with terms less than one year here.

And you can find a similarly comprehensive list of them for terms of one to five years here.

The best way to assess these rates is to use our full-function deposit calculator.

This tool allows you to compare the after tax returns of two options side-by-side. In fact you can compare regular term deposits with term PIEs as well. The list of term PIEs is here.

Here is the list of term deposit changes we have updated this week so far:

	*Tier*	*Term*	*Previous*	*Now*	*change*
Call
Fastsaver	1	call	3.00%	2.75%	-0.25%

BNZ - Personal OnCall	1	Call	3.00%	2.80%	-0.20%
BNZ - Total Money	100,000	Call	3.00%	2.80%	-0.20%

SBS/HBS - iSave	1	Call	3.20%	3.00%	-0.20%
SBS - Prospector Call	250,000	Call	3.20%	3.00%	-0.20%

Cash PIEs
RaboDirect - CAF	250	Call	3.40%	3.30%	-0.10%
SBS Life stages call fund	5,000	Call	3.20%	3.00%	-0.20%

Term Deposits
RaboDirect	1,000	6 mth	4.05%	4.00%	-0.05%
	1,000	1 year	4.25%	4.10%	-0.15%

TSB	10,000	6 mth	4.00%	3.80%	-0.20%
	10,000	9 mth	4.10%	4.00%	-0.10%

HSBC	10,000	1 year	3.85%	3.90%	+0.05%
	10,000	18 mth	4.05%	4.00%	-0.05%

Next week, we are expecting more rate reductions by at least one of the bigger banks.

Update: Kiwibank has reduced its nine month TD to 3.85% from 4.00% this morning.

Term deposit rates

Select chart tabs

Source: interest.co.nz

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46 Comments

by bigblue | 17th May 13, 5:16pm 1368767785

Interest rates both for deposits and mortgages will continue to slide over the next couple of years and the OCR needs a 0.5% haircut asap!

by Wolly | 17th May 13, 5:39pm 1368769159

Will they?...is that the formula for keeping the bubble intact....or the formula for keeping the banks intact....or the formula for keeping the govt intact!

by Stephen Hulme | 17th May 13, 6:17pm 1368771425

Yes and no - more than likely a response to the gusher of money coming out of MRP and looking for a home as a bank deposit.

An ambulance at the bottom of the cliff rescue by the banks in response to another example of National's business incompetence - has Johhny foreigner got all the shares yet?

by iconoclast | 17th May 13, 6:31pm 1368772314

Watch this space -

China’s State Grid Corporation is moving on Australia's power sector, signing an agreement to buy a 19.9 per cent stake in Melbourne-based electricity and gas network SP AusNet from Singapore Power International (SPI) for $824 million.

http://www.businessspectator.com.au/news/2013/5/17/infrastructure/china-moves-sp-ausnet

by Wolly | 18th May 13, 5:59am 1368813554

"..their natural levels"...meaningless Kimy!...the problem remains our government taking financial instructions from those who profit from selling credit.

Deposit rates are so much lower than real inflation that we are best to keep our cash at home.

Expect to see laws that make the keeping more than a few grand at home...illegal.

Expect to see a change to the paper munny and deadlines for all "old notes" to be returned to a bank...this is how 'they' will find out about you and your cash pile.

by Andrewj | 18th May 13, 6:24am 1368815093

Wally, did you see the problem we are having in our biggest sheep market

http://www.stuff.co.nz/business/industries/8687833/China-blocks-NZ-meat-export

Took the Gov a week to tell us. Going to hurt big time, wonder what the Chinese want, more MRP shares?

by Stephen Hulme | 18th May 13, 10:06am 1368828391

Hmmm - The Key Government and his acolytes do not wear their delusions of adequacy lightly.

by Colin Riden | 18th May 13, 10:35am 1368830136

Fran either hasn't read the budget or has and not understood it. Irrespective, acolyte appears to describe her well.

by Gibber | 18th May 13, 1:29pm 1368840556

There appear to be a few definitions of acolyte to choose from. Which one do you think applies best to Fran?

by Colin Riden | 18th May 13, 1:46pm 1368841580

Stephen Hulme's link provides a very good illustration.

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10…

But if you prefer definitions:

From Collins Concise: Acolyte - a follower or attendant.

or alternatively

https://www.vocabulary.com/dictionary/acolyte:

A person who helps with religious services is an acolyte. An acolyte is also a fan or follower of the famous, so you can find an acolyte in church or at a concert.

Acolyte goes back to the Greek root akolouthos, meaning "follower," and it came into English in the 14th century. While an acolyte often serves in an earned and admired role within a religious ceremony, a second definition is "fan." Acolytes of movie star or pro athletes closely follow their careers — and with great admiration — and would love to be just like their heroes.

by Gibber | 18th May 13, 2:28pm 1368844085

Thanks Colin....

I'm a guessing you chose to ignore the urban dictionary definitions I had linked to as possible choices. More than likely a wise decision...

by Colin Riden | 18th May 13, 2:53pm 1368845614

I did look at them, but they didn't seem to fit my understanding of acolyte or describe Fran.

As an example, the fourth urban dictionary definition of acolyte:

Attribute used to describe an impotent young male, usually with an addiction for video games.

by Colin Riden | 18th May 13, 11:08am 1368832112

I think MPI's next name change ought to be to MBI - Ministry of Bumbling Incompetence.

Hopefully someone will argue against me, and we can work from there.

by Andrewj | 18th May 13, 11:12am 1368832337

Colin, RABO did a survey, on sheep and beef farmers, this was the result

A Rabobank rural confidence survey showed 50 per cent of beef and sheep farmers thought their businesses were "just viable" or "unviable". The report said they lagged considerably behind their dairy counterparts in terms of confidence, investment intentions and self-assessed viability.

http://www.hawkesbaytoday.co.nz/news/our-uncertain-future/1870563/

the other %50 didn't want the bank manager to know how deep in the dung they were.

So what happens to land values, I mean for Fs sake %50 unviable is not a rosy picture for the industry. Especially when China becomes your dumping ground for Mutton and Lamb, no one else wants and wont even take your produce. 18000 tonnes of sheep products. Keys visit to China doesn't look like it was a success.

by Colin Riden | 18th May 13, 11:59am 1368835182

Andrew, I see two alternatives. The first guarantees more of the same deterioration in farm viability. The second will be strongly resisted by the status quo but could gain momentum if things are as dire as you suggest:

1. Trust your wise Hawkes Bay Regional Council and their investment intentions. Those investment intentions have government and MBI backing and 'self-assessed viability'.

2. Get angry, get organised, and get ready to clean out the incompetence. Agriculture is a start but will not be enough by itself.

by Andrewj | 18th May 13, 12:46pm 1368837972

Saturday humor

While parts of the rest of the world are still wallowing in recession, New Zealand in recent months has had a significant number of economic bright spots that could see the country reach "rock star status" within the next four years.

Bagrie said New Zealand was being re-rated by the world.

"New Zealand has made some massive inroads in that game in the past three or four years. [If] we continue to do so, we are going to have rock star status in the growth space internationally at some stage in the next four years.

http://www.stuff.co.nz/business/industries/8687995/NZ-heading-towards-rock-star-status

by Stephen Hulme | 18th May 13, 1:53pm 1368842015

On a more sober note - one cannot but wonder if Fonterra will be in a position to honour the dairy farmers at the forecast payout rate without the necessary debt raising or have they managed to close off the currency hedge @ NZD/USD ~0.8400 and reversed it for additional gains down to NZD/USD 0.8060. View earlier commentary in respect of Fonterra's Average Currency Rate (FACR)

by Andrewj | 18th May 13, 2:02pm 1368842566

Lot more milk coming next year

New Zealand milk production declined 16.75% in March relative to a year ago. The decline was broadly anticipated and came as no surprise. Season to date production is 2.7% higher than a year ago. and a lot more competition . The run-up in prices has encouraged milk powder manufacturers in the U.S. and EU to increase WMP production to counteract the shortfall in New Zealand. http://www.milkproducerscouncil.org/updates/051713.pdf

by Casual Observer | 18th May 13, 3:35pm 1368848118

Aj A month is a long time in the dairy industry ;-) milk production to end of April for Fonterra was 0.5% down year to date. Will be even more so by end of May. Last year was a record year for production so I'm not sure there is a true 'shortfall' rather 'less than the record production' of last year.

Once GDT prices reach $3500US they usually crank up production. If it drops below that, they reduce.

The real story will be the financial situation of Fonterra as Stephen H mentions. Currency aside (and it can affect payout wildly), paying $7.92 to buy shareholders shares and selling them for ??? will be interesting to watch. Just what will happen if they don't get their $450m worth of shares?

by Colin Riden | 18th May 13, 1:52pm 1368841960

Humour, or a sad case of cognitive dissidence/delusions of adequacy?

http://www.guardian.co.uk/commentisfree/2013/may/03/nigel-farage-superp…

by Andrewj | 18th May 13, 11:17am 1368832620

mighty big idiots

by scarfie | 18th May 13, 5:09pm 1368853749

Kimy I posted here about a year ago about the survey sent out by RBNZ regarding a make over of their website. Of the dozen questions asked one was "where would you expect to find how to exchange old New Zealand notes for new notes"? You have been warned.

If you have assets with in reach of the government then the government will at some point take them as their income streams dry up. They will target the Japanese housewife in time but they are still an economic giant(a shrinking one), smaller fish like New Zealand will get hit well before.When you get Cyprussed just remember you were warned.

by Andrewj | 18th May 13, 6:04pm 1368857060

Kimy, its really important you understand what Low interest rates do to your capital

I mean its really important that you see the effects of low intest rates, raed about Japan.

Guest Post: Falling Interest Rates Destroy Capital

http://www.zerohedge.com/news/guest-post-falling-interest-rates-destroy-capital

Fiat Currency: Destroyer of Capital

A. E. Fekete

Captains of American industry should issue a Mayday call

Summary for the busy executive

http://www.rapidtrends.com/fiat-currency-destroyer-of-capital/

Banks & Bonds

Interest rates have an inverse relationship with bond prices. A falling interest rate structure will continually prop up bond prices. Any holder of a bond, such as banks, will benefit with a falling interest rate structure. Bank's will become in effect "recapitalized", as the value of their bonds increase. If the banking system were ever to experience a crisis of capital, one method to salvage otherwise bankrupt institutions would be to drop interest rates. Of course saving the banks is never a particularly popular idea, so the actions must be purposed in such a way as to please the general public. Additionally, lowered interest rates theoretically spurns the public to borrow more money, generating increased business for banking institutions.

by Von | 18th May 13, 6:55pm 1368860112

I see the sense of your post. So I think what we, who have money in banks as we are old and cannot afford to make up losses on the sharemarket and don't want to invest in the overheated property market, should all get ourselves in debt up to our necks - God only know where we should spend it - Big TV's perhaps, cruising around the mediterranean with all the other old people (yuk). Because having saved all our lives for a comfortable retirement, are being penalised left, right and centre. Being in debt like everyone else would be good for the economy wldn't it. And becos we only have our capital and our superannuation we can't possibly pay off the debt we are going to have so we will all go bankrupt. Just like the country is. Now getting shit scared from all the comments on this site about banks possibly going bankrupt as well! So cash under the mattress and take out a loan eh?

by Andrewj | 18th May 13, 7:06pm 1368860779

No, im not that worried yet, life goes on. But Id stay short on deposits.

The question is how much capital destruction can we stand. While you may feel poor due to low interest rates others without savings, their state pensions are being anialated. Every year your money gets to buy more so you could spend some capital and still maintain your remaining capitals purchasing power.

Some great comments on the Zero hedge article.

Debt is not the answer, live well be frugal, its where im heading.

by Von | 18th May 13, 7:24pm 1368861872

Yr right of course Andrewj - we actually live well and are frugal - steak 'n kidney home made pie tonight - enough left over for another meal!!! And yes, seriously, we are spending some capital and I was of course being facetious about getting into debt. Not our style at all. I'll look into the Zero hedge article. Thanks and good luck with where you're heading and agree - life does go on.

by Wolly | 19th May 13, 8:04am 1368907473

Good morning Von..you are not alone in your fear of having your savings stolen by a govt doing what its banking masters dictate....when the bomb goes off, would you not rather be enjoying a well planned holiday at your tiny but inexpensive batch somewhere safe on the coast of the Med, knowing your savings are not at risk in a bank back here.

Each to their own Von....you can leave the batch to the grandkids....better than an empty bank account.

The journey you take in buying that batch will be a heap of fun and if you plan wisely, the govt will not be able to steal your Kiwi pension.

Try Corsica!

by steven | 19th May 13, 10:04am 1368914671

A bank deposit is capital lent to another in a private / commercial process who then on lends to another private entity the govn isnt directly invlved. The govn has nothing directly to do with it, hence when a bank fails the capital isnt stolen by a govn but a loss in a private sector transaction.

regards

by Stephen Hulme | 19th May 13, 11:19am 1368919145

The govn has nothing directly to do with it, hence when a bank fails the capital isnt stolen by a govn but a loss in a private sector transaction.

Rubbish. The interferring civil servants at the central bank are forever not allowing a private price discovery mechanisn to decide what interest rates should apply, between the consenting parties.

by Von | 19th May 13, 6:07pm 1368943661

I'm with you all the way there Stephen!

by Wolly | 19th May 13, 2:33pm 1368930787

Why fail to point out the legal right only a bank has to multiply the deposits by whatever they feel like and sell the created credit. Why leave that out Steven?.....a bank is not just another entity.

Banks are 'allowed' as of right, an ability to farm the economy and so they should as a group share the liability of deposits between them...they should all be forced by law to 'own' a share of the risk...that way they will not hesitate to point the finger at failures in the making.

That our fools in the Beehive do what they are told by the banks is just par for the course....but the consequences will be a domino of failures as peasants grab their cash from all the banks and share holders sell as fast as they can.

The OBR is a stupid bit of idiot planning.

by steven | 19th May 13, 9:59am 1368914347

A deposit is an investment and any investment carries risk of loss.

regards

by MortgageBelt | 17th May 13, 5:42pm 1368769368

OCR will be cut not raised in NZ to maintain alignment globally.

Mortgage floating rates will be cut ... floating cuts are already overdue.

1 year fixed will be 4.5% to be competitive.

Bank economists predicting OCR rises in 2014 are completely divorced from global reality.

by Grant A | 17th May 13, 10:02pm 1368784971

The deposit rates falls are simply a reflection of the fall in banks funding costs offshore following the ECB's "we'll do whatever it takes to protect the euro" comment back in Sep last year. CDS spreads, and bank finding spreads, have eased consistently since then as fear of banks lensing to each othef has disparaged for the moment - banks will always arbitage between markets over time so it's just a case of the domestic spreads reflecting that change. The OCR hasn't, and however many times Mortgage Belt keeps repeating himself, probably won't cut the OCR, but lower bank funding spreads have been creeping into somewhat lower fixed rates.

by steven | 19th May 13, 10:08am 1368914914

With inflation below the RB's target they should in fact be cutting the OCR...there is certainly no justification for raising it....and a lot for cutting it. We'll see how the the NZRB can justify sitting on the fence....2 more quarters of below target infaltion I suspect.

regards

by meh | 19th May 13, 2:04pm 1368929091

I just don't get you Steven. You parrot PDK and yet you jump on the same bandwagon as everyone else arguing no inflation and demanding cuts to the interest rate.

by steven | 19th May 13, 3:43pm 1368935023

I dont actually parrot PDK, I follow a similar theme arrived at independantlly. In fact I think we disagree on some issues but in a minor way.

I dont see either as mutually exclusive, or more accurately having soaring/high interest rates would be even worse in PDK's/My descent scenario than low interest rates. Also outside we see most other OECD countries have a low rate, ours is higher and we still have a 2x bubble like everyone else, ergo I see no point in having the pain for no gain.

Also I would say everyone else is coming around to the view Ive followed for 4 years. Most in here and most economists, CBs still seem to think austerity is good and printing == inflation. I think we can see austerity has been a huge failure and printing a non-event while in the keynesian zero bound trap.

regards

by Grant A | 19th May 13, 4:10pm 1368936639

Steven - your time line is way too short, 4years is nothing - countries can spin out this process a long time before reality finally sets in. Your arguments would be added weight if you could show us examples of countries, who without defaulting first, havent had to eventually start living within their means (these days called "austerity), and most partcularly, countries that have massively printed money, where its turned out not to be tears ?

by Jethro | 18th May 13, 12:25am 1368793513

Reasons to be cheerful part 1

NZ banks covered bond borrowings running at $11 billion plus. 10% of bank assets sanctioned for use as covered pool backing (no guarantees on future % ). But the man says... "The main benefit is the reduced likelihood that a bank will default in times of financial market stress." Add no formal LVR controls, houses overvalued at 25%, loan to deposit ratios running at 140% plus, drought affecting dairy earnings, S&P negative watch on banks without covered bonds chasing lending rates of those that do, OBR ready and waiting from July 1st though effects unknown, Australian silk parachute holed, Chinese steam train losing traction. No worries then.

by steven | 19th May 13, 10:12am 1368915168

You missed no signs of inflation in NZ or indeed the OECD. The EU in recession with a staggering youth un-employment %. Excess manufacturing capacity......china in on huge property ponxzi scam....yeah sure no worries....

I hope we last til July,,,,

regards

by Grant A | 19th May 13, 10:27am 1368916064

Certainly one more Steve, but that's already priced into markets and in the RBNZ's models. But what is today is just the starting point in anyone's model, and with changes in monetary policy having a 12-18 months lag time, it always will be - what your saying is that is going to be that way for a lot of quarters, who knows, but I'll trust the RBNZ's models over anyone's in the public.

by steven | 19th May 13, 12:12pm 1368922353

Hmmm, well looking at how well the RB and Treasury anticipated 2008 (and afterwards with the actual output below Treasury's worst case) you have to wonder on the model(s).

So far I'd suggest the deflation is probable, so Keynes and Minsky are showing the best model.

Yes I think this is a decade, if not 3 event....the rest of my life at least.

The fundimentals I base it on are,

a) fossil energy output is linked to economic output, since fossil fuel output will decline so will the world's economy.

b) BBs retiring and the costs and lack of $s for that, a double drag.

c) Debt overhang compounds it, a third drag.

So the Q is what long term "things" are there to compensate/counter the above?....none I can see.

regards

by Grant A | 19th May 13, 2:49pm 1368931763

Yes I agree with those three Steven, and as far as forecasting goes, youre right, the RBNZ didn't see it coming obviously, but neither did the public who's borrowers were 80% fixed according to RBNZ stats when interest rate crash came (they're 58% floating now so there's your next problem developing at the other end). The real problem is in thinking that keeping most global real interest rates negative will solve these three issues. Extended periods of negative real interest rates and money printing always creates massive distortions in an economy, and havoc when they are unwound.

And when it is (I'm sure youre not suggesting both can remain forever), that will likely be the trigger to fix the debt problem (defaults and massive losses are taken), and higher real interest rates will assist somewhat to keep BBs off the taxpayers back than otherwise, and for a while at least, keep energy demand down - none of it pleasant, but it will be THE major leg of the GFC

The US has had majorly negative real interest rates for some years now throughout the GFC which is clearly unsustainable, and there is already talk of starting to unwind it. Personally I doubt they will do so to any great extent until they're forced to (they will talk the talk though), but note a 10bps point overnight rise in NZ rates a week or so ago just on the suggestion in a US newspaper article that it was being considered). Who knows the timing but it happens pays to remember that US bond rates are benchmark for the direction of all global rates, including NZ fixed mortgage rates, and it won't matter a toss whats happening here.

by splineman | 18th May 13, 11:22am 1368832938

It's ridicoulous to talk about interest rates finding "natural" levels.

The price discovery is completely obscured these days. Leave central banks out of the QE, bailout, bond purchase business and then see where the rate floats to.....

Of course banks don't want deposits....they can get almost free credit these days from CB's.

Time preference has nothing to do with it.

Cheers

by Grant A | 18th May 13, 12:33pm 1368837233

Yes agreed, but not the case in NZ though Splineman, thank God

by MortgageBelt | 19th May 13, 5:54pm 1368942871

Westpac just cut 1 yr rate to 4.79%

(Aus)