As wholesale rates fall, banks keep reducing their term deposit offers. Some opportunities are briefly open

This morning, Kiwibank has trimmed all its term deposit rates for terms of two years and longer.

Yesterday, ASB did the same for terms longer than one year.

This week's moves follow on from similar downward changes by ANZ last week.

Term deposit investors are facing a sinking market.

This is a market driven by lower wholesale rates.

And those are driven by lower international benchmark rates.

We are currently in a transition period where some banks have reduced their offers and others are yet to. That gives a small window in which to lock in some higher, longer term rates before they too disappear.

For example, both Co-operative Bank and SBS bank are still offering 4.70% for 18 months, closely followed by RaboDirect at 4.65% - and these rates are above the 4.50% level where the main banks are settling.

For two years, 4.85% is still available from the same two second-tier banks, a nice premium above the 4.60% from almost all main banks.

For three years, Heartland Bank's 5.15% stands out being 45 bps above the main banks.

And for five years, Heartland Bank's 5.70% offers a 70 bps advantage over where main bank rates seem to be settling.

How long these advantages will last is unknowable, but in the short-term at least the pressure will be on all banks to lower their offers.

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 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.

This positions the latest offers as follows:

for a $20,000 deposit 6 mths 1 yr 18 mths 2 yrs 3 yrs 5 yrs
             
4.10% 4.40% 4.50% 4.60% 4.70% 5.00%
ASB 4.15% 4.40% 4.50% 4.60% 4.70% 5.00%
4.10% 4.50% 4.55% 4.60% 4.75% 5.05%
Kiwibank 4.50% 4.60%   4.60% 4.75% 5.05%
Westpac 4.10% 4.50% 4.60% 4.70% 5.00% 5.30%
             
Co-op Bank 4.20% 4.30% 4.70% 4.85% 5.00%  
Heartland Bank 4.40% 4.50% 4.65% 4.75% 5.15% 5.70%
HSBC Premier 4.00% 4.20% 4.40% 4.50% 4.70% 5.10%
RaboDirect 4.35% 4.55% 4.65% 4.80% 5.00% 5.45%
SBS Bank 4.35% 4.60% 4.70% 4.85% 5.10%  
4.00% 4.40% 4.50% 4.65% 5.00% 5.30%

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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16 Comments

These deposits rates are quite good compared to many other countries. 
Especially when the day may be coming when the depositor will pay the bank for the privilege of holding the money for safe keeping! 
 

[ In appropriate/offensive phrasing deleted. Ed ]  If interest rates fall, will it signal we are in a period of Japanese style deflation?
  

I'd assume that we'll see deflation first, then the RB will panic and slash the OCR.  Politically, that tide going out will be interesting, NZ banks wont be able to hide behind the OCR rate.
very interesting.
 

There will be no deflation in NZ this year.
OCR will increase in the last quarter.
Oil price reductions are very good news, and will increase our GDP 0.2% more than otherwise this year.
 

Externally the only country/economy of size left "doing OK" is the USA and that looks rather bad right now in shale oil and its junk bond feeding.  Then everything is so interlinked and complex and rotten (like EU) that I cannot see why the OCR will be rising unless the NZRB is determined to commit suicide at year's end.
As for no deflation looking at the CPI I think its quite possible with petrol's drop we will see damn close to 0 in the middle of the year.
 
 

I think spottie many confuse disinflation with deflation - there will be some good disinflation in the 1st half but very unlikely deflation. Plus far too many are confusing zero growth and massively indebted countries with NZ 's situation.

You cant have much more dis-inflation though without having deflation, its pretty borderline as it is.

True - we'll probably be at 0.8% after tomorrows CPI and a bit lower than that after April's one, but the modelling I've seen would suggest it needs alot of other factors to come into play to get to deflation in 2015 - hey, oil goes to $5 a barrell and stays there all year, Kiwi goes back 88cents etc, yup anythings possible, just thats not where the odds are (such as you can assess them in the globe at the moment where only one thing is certain, volatility).

Thanks Grant A.
 I wasn't aware of the term disinflation.
Helping our economy to grow.
Not any worrying deflation.

Before you get cancer there are usually indictors, same with deflation, disinflation is the indicator if it persists, and it is.
It doesnt help our economy grow it is an indictor it isnt.
 
 

Are you trying to tell us that falling oil prices is not good for our economy ?

In terms of engineering when the deired set point is 2% +/- 1% a control valve would be opening right now to give more flow.

Hmmm you may end up being right Steven. That number today suggests the next one due out in April risks a small dip below zero, although the NZD coming down right now will be a positive and a moderator - interesting times. 

Its strange how deposits have gone up in the States with record low returns.
http://research.stlouisfed.org/fred2/series/WSAVNS
I know a lot of money is out chasing yield but I would have though Gold would have looked good if you thought inflation was a risk, does the fact that so much money is sitting on deposit signal a belief that we are going to in a deflationary environment?
  I was reading about a sheep farmer in the South Island complaining that he was only getting a %2 to %2.5 return on investment, which is actually quite good in the world we live in today, he should stop complaining.
 
  Just watch for the next CB to trip up.
 
 

Got to wonder....and yes I think so. Though partially it maybe because there is so much money but so little worth buying that isnt over-priced?
 

It will be interesting to see how oil plays out this year.
Watching how the big oil players manoeuvre around the board will be interesting in 2015......I'm thinking there will be a massive buy-up from the big players as those who struggle to stay afloat at todays prices abandon at pace.....Oil prices will then increase as the supply-side is back under the old boys.......the game being played around the world is all about creating inflation and it is highly likely the oil industry will be the industry that creates that inflation.
 
It is interesting to look at M3 money forecasts on sites like this.
http://ieconomics.com/new-zealand-money-supply-m3-forecast