We know banks are holding back OCR cuts from borrowers, so what sort of deal are savers getting?

We know banks are holding back OCR cuts from borrowers, so what sort of deal are savers getting?

We have been critical of the 2016 trend of banks not passing on full Reserve Bank rate cuts to borrowers. The trend seems to be embedding.

The banks themselves have pointed out that in some rough equalising bargain, they have been paying savers 'more' as the official underling policy rate has fallen.

While they use selective term deposit terms to feature this point (and often non-standard terms), our review suggests that the trend overall backs up their claims.

Generally, rates have fallen, but both borrowers and term savers have seen smaller falls that indicated in the policy rate.

And that means a better deal for term savers than for floating rate borrowers.

Be a little careful with our table below because banks pitch their 'best rates' and 'specials' at fixed terms that may be different to those two terms listed here.

For example, you can get 3.60% from many banks for an 18 month term, and 3.65% from ASB. And no banks, large or small, offer rates above 3.80% for any term (3.80% is offered by Heartland for a 5 year term). The retail rate curve is now fairly flat.

But what is clear from this view is that the general proposition that savers have been spared the full decline in wholesale rates is largely true, at least from mid 2015. Prior to that, and especially since early 2015, there had been a closer relationship between wholesale rates and retail offers. That is less so now than in the past.

No New Zealand saver is going to think 3% plus rates are 'good', but they are certainly better than what is available in many other countries. And looking forward, one thing seems fairly certain; they are unlikely to improve from here.

Borrowers might be raising an eyebrow however. Their rates aren't going lower either, and they tend to be a younger aged group. In a situation where borrowers are 'paying a bit more' while savers are 'receiving a bit more', the inter-generational fault line is exposed; 'boomers win again'.

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 carded, or advertised, 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.

Here are some benchmarks over the past fourteen months:

for a $25,000 deposit Term 30-Jun-15 31-Dec-15 31-Mar-16 30-Jun-16 31-Aug-16 change
    % % % % % bps
Reference rates:              
RBNZ OCR daily 3.25 2.50 2.25 2.25 2.00 -125
One year swap rate 1 year 3.07 2.75 2.21 2.25 2.03 -104
               
Main banks:              
6 mths 3.80 3.30 3.15 3.15 3.15 -65
  1 year 4.00 3.45 3.25 3.25 3.25 -75
ASB 6 mths 3.80 3.30 3.30 3.20 3.20 -60
  1 year 3.95 3.40 3.25 3.20 3.20 -75
6 mths 3.90 3.50 3.20 3.15 3.15 -75
  1 year 4.10 3.55 3.25 3.25 3.25 -85
Kiwibank 6 mths 3.75 3.30 3.10 3.10 3.15 -60
  1 year 4.00 3.50 3.30 3.35 3.25 -75
Westpac 6 mths 3.75 3.10 3.00 3.00 3.50 -25
  1 year 4.00 3.40 3.20 3.20 3.20 -80
Other banks:              
6 mths 3.95 3.20 3.25 3.10 3.50 -45
  1 year 4.00 3.30 3.30 3.30 3.30 -70
Heartland Bank 6 mths 4.15 3.40 3.25 3.30 3.30 -85
  1 year 4.30 3.55 3.30 3.40 3.40 -90
HSBC Premier 6 mths 3.50 2.90 2.80 2.80 2.80 -70
  1 year 3.60 3.00 2.90 2.90 2.90 -70
ICBC 6 mths   3.45 3.25 3.25 3.30 [ -15 ]
  1 year   3.60 3.45 3.45 3.25 [ -35 ]
RaboDirect 6 mths 4.10 3.45 3.00 3.30 3.30 -80
  1 year 4.15 3.60 3.45 3.30 3.40 -75
SBS Bank 6 mths 4.10 3.45 3.35 3.30 3.55 -55
  1 year 4.15 3.50 3.35 3.30 3.25 -90
6 mths 3.75 3.30 3.20 3.10 3.15 -60
  1 year 4.00 3.50 3.30 3.20 3.20 -80
Others:              
UDC 6 mths 3.85 3.50 3.30 3.20 3.20 -65
  1 year 3.95 3.65 3.60 3.45 3.45 -50

Our unique term deposit calculator can help quantify what each offer will net you.

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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I'm fairly sure that co-op bank still offers 4% https://www.co-operativebank.co.nz/accounts/tertiary
you need to sign up for a masters or other tertiary qualification.

David I'm not sure why you only referenced Boomers - add in everyone that has Kiwisaver account or other savings/investments. The pension and insurance companies globally that are increasingly becoming a concern to regulators and central banks hold investments for many across the generations including the young. Unless something changes with rates, the young will not only struggle to repay of their big mortgages but they will also have little in retirement savings. Of course it will change as it is unsustainable, and there will eventually be a level of rates that work for both, but God help us if we have a 20 plus years Japanese situation globally.

"Baby Boomers Win Again" seems to be a running theme by various interest.co.nz contributors - as if those aged between 52 and 70 are somehow a group to be blamed for numbers of things. [disclaimer - I am not a boomer] These sorts of generalizations about boomers don't advance any discussion.

The "Win Again" category are surely the investors who have had mortgage interest rates drop continually with each of the last 6 OCR cuts.

And, while we are at it, the same 6 OCR cuts have resulted in the exchange rate (against US $) being almost exactly the same now as when the OCR cuts started in June 2015 - hardly the basis for claiming that another one or two or three OCR cuts are going to magically do anything other than further fuel the housing crisis and decrease any incentive at all for saving with banks.

Yeah Nah.

I only have my boomer savings on call. Term deposits don't offer enough return to justify the risk. At least for the next couple of years anyway.