A major bank sets a term deposit offer rate at a level last seen 15 months ago, as they offer savers a way to benefit from longer term rises in wholesale rates

A major bank sets a term deposit offer rate at a level last seen 15 months ago, as they offer savers a way to benefit from longer term rises in wholesale rates

In addition to hiking longer term fixed mortgage rates, BNZ has today (Monday) changed a range of term deposit rates.

It has cut its 3 month term deposit rate by -25 bps to 2.75%, and cut its five month term deposit rate by -20 bps to 3.30%.

However, it has also announced a 'special' term deposit rate of 4% for a two year term.

This rate is available for deposits of just $5,000 minimum (and up to a maximim of $1,000,000).

But, there are catches.

Firstly, this 4% offer is not available as a PIE.

And secondly, this new offer is "interest at maturity", so you will need to wait the full 24 months to earn the interest earnings. Interim interest is not available for this special offer. (If you don't need the interest paid more regularly, this 4% IAM rate returns the same after-tax result as a 2 year term deposit with 3.90% interest compounded quarterly. Use our deposit calculator to run the senarios for your specific situation.)

Update: This offer is only available until Sunday, December 4. BNZ has not stated how long this offer will be available.

The last time any BNZ rate was at 4% or more was on March 11, 2016 when its 5 year TD rate (interest yearly) was 4%.

The last time a BNZ two year rate was at 4% or more was on August 14, 2015 when it was 4.05%.

The last time any retail bank offered a rate of 4% or more was March 18, 2016 when ASB had a five year rate at that level.

The breaching of the 4% level will give savers some hope that higher rates are on the way, and will enable them to negotiate with other banks for higher rates.

But the locking up of funds for longer terms in what seems to be a turning rate environment will have many savers thinking through the risk/reward scenarios.

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.

The latest headline rate offers are in this table.

for a $25,000 deposit Rating 3/4 mths 5/6 mths 8/9 mths 1 yr 18 mths 2 yrs 3 yrs
AA- 3.00 3.35 3.50 3.55 3.45 3.35 3.40
ASB AA- 3.00 3.20 3.25 3.20 3.50 3.25 3.35
AA- 2.75 3.30 3.60 3.25 3.30 4.00 3.40
Kiwibank A+ 3.20 3.15 3.20 3.60   3.25 3.40
Westpac AA- 3.40 3.35 3.10 3.40* 3.20 3.25 3.30
BBB 2.95 3.50 3.30 3.50 3.55 3.60 3.65
Heartland Bank BBB 3.10 3.30 3.70 3.40 3.40 3.40 3.70
HSBC Premier AA- 2.55 2.90 2.90 2.90   2.90 2.95
RaboDirect A 2.85 3.50 3.35 3.40 3.40 3.45 3.55
RaboDirect BBB 2.75 3.55 3.30 3.70 3.45 3.35 3.40
A- 3.00 3.15 3.15 3.20 3.25 3.30 3.40
UDC A- 3.00 3.35 3.60 3.60 3.65 3.45 3.45
Wholesale/swaps   2.08 2.13   2.12   2.27 2.45

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?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


just a juggling trick to come up with a four,only handy if you wanted to postpone your tax liability or reduce income for that period.3.5% monthly would be a better deal if you live on your investment.

It's just silly how NZ doesn't use APR.

I may be wrong but don't most banks charge compounding interest on loans,so if they do why can't they return the favour?

bank...favour...you must be dreaming.

My thoughts too. I wondered who wrote the headline - was this spin straight from the bank PR machine or is there commission involved?

Banks don't offer favours and either way it's a pretty stingy one with interest at maturity. Banks don't care about savers and frankly I'm disappointed with the spin. Deceit and mistruth, lies and propaganda.

Just out of interest, anyone know, is there a percentage of the amount invested in the TD that is applied if the need arises to break the term early?

You couldn't pay me to put my money with BNZ.

Ba doom tish. I'm here all day guys.

But, in all seriousness, 4% doesn't even begin to cover that risk and 2 years is a looong time when things start to go wrong for our banks, some of which are more marginal than others. With uncertainty around dairy, housing, Trump, Brexit, EU and China, international funding is already becoming more expensive for emerging and commodity dependent markets. This is why our banks are suddenly offering more for TDs - they are struggling to obtain economically feasible funding from their own international bankers.

I see some of our "regional" and rural-focused banks with rates in the 2s and 3s. What a gross understatement of risk. In my opinion, it would be mad to put money with any of them. Where are our regulators? Must be preparing their bus tickets for dampening.

this is the very same bank whose chief economist keeps saying that there is no property bubble and that prices will continue increasing.

Em.. I rather put my money somewhere else than locking it there for 2 years.

But it's good news though, hopefully others follow and banks start paying more attention to savers

I would be very surprised if anyone at the high levels of BNZ actually believe in what Tony says.

4% is still a pitiful rate historically. There does currently seem to be a trend with banks offering better deposit rates at the moment. Locking money in for 2 years though is a long time.

A sensibly laddered term deposit portfolio will be well positioned to take advantage of any lift in rates. Which makes a pleasant change after the past couple of years.

So what have the BNZ got going on that they need extra money on hand for over the next two years?