Term deposit rates go down over the cliff with 3% fading over the horizon quickly as the pace of reductions picks up and spreads to most institutions

Term deposit rates go down over the cliff with 3% fading over the horizon quickly as the pace of reductions picks up and spreads to most institutions

The pace of term deposit rate cuts is picking up.

And they are spreading lower than the benchmarks set by ANZ.

ASB and Westpac have pointedly set their offers below the levels ANZ set just five days ago.

Rabobank has chimed in with reductions across the board today.

And they follow a series of other institutions, all cutting.

Only Kiwibank, Heartland Bank, and SBS Bank are left with rates that feature 3% levels in the popular terms.

Lower bank funding costs as reflected by these reductions are allowing lower home loan rates.

Banks are raising their wholesale funding at very low rates which also puts pressure on retail offers to savers.

And after today's market rout, wholesale swap rates have fallen sharply when they opened here today, down -3 bps across the board.

And given inflation is running at 1.7%, after-tax, after-inflation yields from term deposits are likely to approach zero at some point if this trend continues.

For readers looking for risk-free returns, we should also note that the 1.50% offer for the Government's Kiwi Bonds (for fixed 6 month, one year, two year and four year terms) is still available. But Treasury is almost certain to cut this offer to 1.00% very soon. Just a guess on our part, but in the past this rate has been very responsive to the OCR changes.

The updated rates in the table below are the highest offered by each institution for the terms listed. You will, however, need to check how often interest is credited or paid. That important factor is not filtered in the table and rates with various interest payment/credit arrangements are mixed here. However, our full tables do disclose the offer basis. (The codes are explained here).

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

All carded, or advertised, term deposit rates for all financial institutions for terms of less than one year are here, and for terms of 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 / 7
mths
8 - 11
mths
  1 yr   18mths 2 yrs 3 yrs
Main banks                
ANZ AA- 2.50 2.90 3.00 2.85 2.85 2.90 3.00
ASB AA- 2.35 2.85 2.80 2.75 2.70 2.70 2.70
AA- 2.45 2.95 2.90 2.80 2.80 2.80 2.95
Kiwibank A 2.65 3.05 3.05 3.00   3.00 3.05
Westpac AA- 2.50 2.80 2.80 2.75 2.75 2.75 2.75
Other banks                
Co-operative Bank BBB 2.55 2.90 2.85 2.90 2.85 2.90 3.00
Heartland Bank BBB 2.60 2.80 3.00 3.05 3.10 3.15 3.20
HSBC Premier AA- 2.40 2.70 2.70 2.70   2.70 2.70
ICBC A 2.55 2.90 2.90 2.90 2.90 2.95 3.00
RaboDirect A 2.25 2.95 2.95 2.95 2.90 3.00 3.00
RaboDirect BBB 2.75 3.10 3.05 3.00 3.00 3.00 3.00
A- 2.50 2.90 2.90 2.85 2.85 2.95 3.00

Term deposit rates

Select chart tabs »

The '1 year %' chart will be drawn here.
Loading...
(bank averages)
The '30 days %' chart will be drawn here.
Loading...
(bank averages)
The '90 days %' chart will be drawn here.
Loading...
(bank averages)
The '6 months %' chart will be drawn here.
Loading...
(bank averages)
The '2 years %' chart will be drawn here.
Loading...
(bank averages)
The '3 years %' chart will be drawn here.
Loading...
(bank averages)
The '4 years %' chart will be drawn here.
Loading...
(bank averages)
The ' 5 years %' chart will be drawn here.
Loading...
(bank averages)

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.

23 Comments

Comment Filter

Highlight new comments in the last hr(s).

ASB for 5/6/7 looks to be the pick of the bunch :). Regardless, when any of those mature, even at 2.85%, it will be interesting to see what the reinvestment rate is!

The DOW tumbled 800 points yesterday due to fears over the coming recession. The GFC 2.0 is a matter of days or weeks away and the RBNZ has nothing to counter it with. We are in trouble!

Big call. Let's catch up in a couple of months to see if this prediction comes to fruition. And no funny business - slowing growth or slightly lower share prices doesn't count as GFC 2.0.

And in terms of what RBNZ can counter with when the next recession rolls around - here you go https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletin...

Inversion of yield curve doesn't mean recession is weeks away.

We also have a very low gov debt to GDP by international standards. This combined with the unconventional monetary policies in the link above should keep us better off than our counterparts during the extended global recessionary phase yet to come.

Except that the GOVT faces capacity constraints with any new spending. With unemployment so low and the construction industry straining - how will the GOVT step up into the gap if there's nowhere to spend the money?

If capacity constraints really are that big of an impediment, I favour tax cuts - let the populous do the spending. But presumably in a recession unemployment would've crept back up, giving some extra capacity, albeit late in the cycle.

Or a one off lump sum payment to all citizens over 18. Has been done in other countries (e.g. Australia).

I need a new hedge trimmer

Yes apparently the indicators are for an official recession in many markets if they contract for another quarter and we are looking at something like a GFC in 12 to 18 months.

Typo with the ASB TD rate for 5 / 6 / 7 mths. 2.85% not 3.85%.

ugh. Sorry. Fixed now.

plus they have a 3% 7 month special

time to send that cash to aussie, its safer and so will be there $

Sharetrader , why would the Australian $ be "safer"

their economy is going in the opposite direction of ours

Australian Bureau of Statistics data released on Tuesday shows the national trade surplus is now at a record A$8 billion, with exports climbing one per cent from May to June, while imports fell four per cent.

Australian Bureau of Statistics data released on Tuesday shows the national trade surplus is now at a record A$8 billion, with exports climbing one per cent from May to June, while imports fell four per cent.

Hang on. Iron ore prices have been relatively high and 75% of Chinese iron ore has been sourced from Aussie. Are you comfortable with that continuing into the near future?

...nah they are going in the same direction, probably leading the race. Household mortgage stress is through the roof, housing and apartment market is hemorrhaging. They are planning for negative interest rates (as evidenced by their cash ban they are trying to sneak through parliament).

...nah they are going in the same direction, probably leading the race. Household mortgage stress is through the roof, housing and apartment market is hemorrhaging. They are planning for negative interest rates (as evidenced by their cash ban they are trying to sneak through parliament).

Well you're a bundle of joy. Unfortunately, the "evidence" suggests that you're possibly right.

So following last weeks 50 bps reduction in the OCR, is this a net positive or negative for New Zealand's economy when viewed by the changes in deposit/mortgage rates.

Only time will tell whether the RBNZ has helped or hindered the overall economy. The winners seem to be those already in the property market and the banks which are very profitable and likely to remain that. The losers are anyone trying to save - whether for a first home, or for support in current or future retirement. For the RBNZ to try to force such savers into more risky investments is likely to backfire, as is trying to convince savers to spend now and stop their saving. The reverse is more likely in the near future.

The chances are that many people won't renew their term deposits when they mature - as bank deposit interest rates are pathetic.

Instead, they'll invest the money in shares and property - or simply spend it.

TTP

Has anyone calculated how much deposit holders would need to withdraw for it to have a negative effect on a banks cash ratios?

Well seeing as the banks are already complaining about the new higher level of capital they are required to hold, one could only conclude that any amount lost in deposits is going to spell bad news for the banks unless they can find cheaper money elsewhere and the lower the rate the less likely that would be. One would hope we will see TD rates bottom out after one more OCR cut.