Recent offers from a number of credit unions has shifted the spotlight to a section of the savings market that most savers overlook.
Rates in the mid to high fours (even above) are on offer from four of them.
These institutions are not large by bank standards, but they do occupy a unique place in the financial institution landscape. Most are under the Co-op Money umbrella (which also includes building societies) and together account for an industry segment with over $1 bln in assets. This sector is not micro either.
They are growing fast, although lending growth at some slowed last year. Leverage rates are about half those of banks.
|all 2016 unless stated||Credit
|NZ$ mln||%||NZ$ mln||%|
|Aotearoa Credit Union||5.1x||19.7||-6.0||14.9||+7.4|
|NZCU Central (2015)||5.2x||21.8||+15.8||14.1||+12.5|
|First Credit Union||BB-||5.3x||324.4||+13.3||178.8||-1.0|
|Police Credit Union||BB+||5.6x||118.8||+9.2||60.6||-7.2|
|Totals for this group*||6.0x||$ 927.3||+10.0||$601.5||+1.7|
* There are others of course, but tend to be enterprise related.
These institutions tend to hold large residual cash reserves, making them unusual among New Zealand deposit takers.
They also don't pay tax under a unique legal provision, which also allows a more rapid buildup of reserves.
Here are their current rate offers:
|for a $25,000 deposit||Rating||3/4 mths||5/6/7 mths||8/9 mths||1 yr||13/18
|2 yrs||3 yrs|
|Aotearoa Credit Union||2.90||3.10||4.50||4.95||5.25||5.50||5.60|
|First Credit Union||BB-||3.10||3.70||3.75||3.80|
|Police Credit Union||BB+||2.80||3.30||3.60||3.70||3.75||3.85||4.05|
The benchmark 'risk free' return for savers are AAA Kiwi Bonds and they return just 1.75% for terms of six months and one year, 2.00% for two years, and 2.25% for four years. Any rate above that is a premium for risk. Credit ratings are one way to assess risk.
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.
For comparison, the latest headline rate offers from banks and a couple of large finance companies are in this table.
|for a $25,000 deposit||Rating||3/4 mths||5/6/7 mths||8/9 mths||1 yr||18 mths||2 yrs||3 yrs|
|* = the only credit rating in this review that is not investment grade.|
Update: Westpac rates have been updated in the above table on Monday, April 24, 2017.
Our unique term deposit calculator can help quantify what each offer will net you.