While home loan rate changes have been quiet this week, a couple of banks have taken the opportunity to trim their term deposit rates again.
First, the Co-operative Bank announced some reductions, and today (Thursday) banking major ASB has cut almost all rates and by from -5 bps to a chunky -15 bps.
ASB's largest cut was to their three month tenor, down from 2.10% to 1.95%. although that is not as low as BNZ's already low 1.90% for that short term.
ASB also cut -15 bps from its four month rate taking it down to 2.20%. Actually, that is now -20 bps lower than the four month offer from Westpac at 2.40% and which is also available at Heartland Bank, and SBS Bank.
ASB's highest rate is now its nine month rate, down just -5 bps to 2.75%, matching main rivals ANZ and Westpac for that tenor. But ANZ is still offering 2.80% for six months as is Westpac, and as are a couple of challenger banks.
It is hard to know whether this ASB shift lower is in advance of an impending ASB home loan rate cut, or as a consequence of last week's actual fixed mortgage rate cuts. But the bald fact is that both are still stepping lower even if they are somewhat out of sync. Small regular reductions seems to be the strategy at all banks, enabling them to push through reductions to savers without too much negative publicity.
It is useful however to take a look at how one big bank has changed key term deposit rates over a longer timescale. Here is the data for ASB:
| ASB as an example ... | OCR | 3 mths | 6 mths | 1 yr |
| % | % | % | ||
| October 26, 2018 | 1.75 | 2.70 | 3.25 | 3.45 |
| Feb 22, 2019 | 1.75 | 2.70 | 3.25 | 3.35 |
| April 26, 2019 | 1.75 | 2.60 | 3.40 | 3.25 |
| July 26, 2019 | 1.50 | 2.40 | 3.05 | 3.00 |
| October 24, 2019 | 1.00 | 2.20 | 2.60 | 2.60 |
| drop from Oct-18 to Oct-19 | -0.75 | -0.50 | -0.65 | -0.85 |
[Update: There was an error in the above table where we had the one year rate as 2.50% which was wrong. Corrected above.]
Among the standard retail banks, the highest offer is currently the 3.00% at SBS Bank for a three year term. A 3% rate is now unique to SBS Bank for any term (although the Indian Bank of Baroda, and the Korean Kookmin Bank also offer +3% rates for long terms. But no other national retail bank does).
Among other offers, those from Chinese bank ICBC and by Heartland Bank stand out, with 2.90% for six months at the former, and 2.90% for 15 months by Heartland.
But it is hard to see any of these higher rates hanging around very long.
For readers looking for risk-free returns, we should also note that the 1.00% offer for the Government's Kiwi Bonds (for fixed 6 month, one year, two year and four year terms) is still available. As expected, Treasury cut it to this level soon after the last OCR reduction. Even after that full cut, the relentless chiseling away at bank term deposit offers means that the premium from commercial banks over this risk-free benchmark continues to narrow.
That the Government now offers Kiwi Bonds at a -50 bps discount to inflation is not a great signal to those who need low-risk interest income. That will mean capital decumulation by retired people will be accelerating. Longer life expectancy may well put earlier pressure on social services and income support than Treasury is expecting.
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.
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- | 2.35 | 2.80 | 2.80 | 2.70 | 2.60 | 2.60 | 2.60 |
 |
AA- | 2.20
|
2.60
|
2.75
|
2.60
|
2.50
|
2.50
|
2.50
|
 |
AA- | 2.25 | 2.70 | 2.65 | 2.60 | 2.50 | 2.50 | 2.50 |
| Kiwibank | A | 2.35 | 2.75 | 2.70 | 2.70 | 2.60 | 2.60 | |
 |
AA- | 2.40 | 2.80 | 2.75 | 2.70 | 2.70 | 2.70 | 2.70 |
| Other banks | ||||||||
| Co-operative Bank | BBB | 2.15
|
2.70 | 2.60 | 2.60
|
2.50
|
2.50
|
2.50
|
 |
BBB | 2.40 | 2.80 | 2.80 | 2.80 | 2.90* | 2.80 | 2.80 |
| HSBC Premier | AA- | 1.90 | 2.20 | 2.20 | 2.05 | 2.05 | 2.05 | |
| ICBC | A | 2.45 | 2.90 | 2.80 | 2.80 | 2.80 | 2.80 | 2.80 |
 |
A | 2.15 | 2.80 | 2.75 | 2.65 | 2.60 | 2.60 | 2.80 |
 |
BBB | 2.40 | 2.80 | 2.80 | 2.75 | 2.75 | 2.75 | 3.00 |
 |
A- | 2.35 | 2.70 | 2.70 | 2.70 | 2.70 | 2.70 | 2.70 |
* This is a 15 month rate.
Term deposit rates
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51 Comments
Lastlegs
Despite it was not what Martin Hawes said, you were adamant that those 65+ should get their money out of KiwiSaver with urgency due to the impending collapse of the share market.
You also expressed that financial advisors could not be trusted as they had vested interest.
So now it appears that term deposits, KiwiSaver, share market, and financial advisors are all out.
Interested to know your thinking on options for a 75 year old past and beyond getting into investment property (given the constraints and implications of the bright line test) and gross yields of less than 5% (with net around 3%).
For someone who is 75 they could have 25% in equities (those with dividend payments are probably a better choice), and 75% in a cash fund and TDs. Dividends can yield better gross returns, don't have any associated debt servicing and no time needs to be spent finding tenants or repairing flats.
dictator,
I disagree. That is much too high a percentage in cash. I am 74 and my portfolio is as follows: 58% equities with a strong focus on dividends, 22% investment property, 16% cash(PIE TDs) and 4% miscellaneous. If I am fortunate enough to remain healthy, then by around 80, I would expect to reduce my equity percentage to 50%.
I remember the simplistic platitude of 90 minus your age as the amount one should have in equities (or any high risk investments). The problem with any equity exposure at older age is the issues involved with a downturn, where one has to eat seed corn when valuations are low. By the time you are 70, you should have acquired enough savings to require a return that only matches inflation. If you have a high equity exposure, bad things tend to happen in a downturn as withdrawals for expenses can be very painful when valuations are down 30-40%.
I did a Monte carlo simulation quite some time ago using the past 100 years equity returns to understand what can happen. On average it is better to have high equity exposure. The issue with that is with what happens in the tails of the probability distribution. I went with a 90% probability of my funds outliving me assuming a 90 year lifespan which put me into primarily low risk investments for being late 50s to maximize the chance that my money will outlive me. A high exposure to equities at older ages can get one in serious trouble in a protracted downturn.
printer8,
what risk do you want to take?,what skills do you have?,if you are sitting in your carpet slippers in a retirement unit waiting for the abyss then the options are limited.you can come up with some original ideas of your own,we will be interested to hear them,people are generous,very few nit-pickers on the site.
lastlegs
I am using - and recommend to others in a similar position over 65 - to use their KiwiSaver as a vehicle to invest at a risk that suits them. One of the reasons for this is than management fees are less than a similar bank managed fund. This could include even splitting their KiiwSaver between a more conservative for short term needs and a more growth fund for longer term investment and draw down from their conservative fund and balance (which they can do being over 65) this to meet their needs. This is sound and prudent and recommended by reputable commentators - such as Mary Holm - without a direct vested interest in doing so.
However, I was very alarmed at your response to Martin Hawes article a week or so ago when he indicated that growth KiiwSaver funds would be adversely affected in a market turn down. He did not advocate taking funds out of KiwiSaver; moving them to a more conservative fund could be more appropriate for those without a long investment outlook.
You were alarmist and acted like Chicken Licken claiming that the sky was falling and urging all over 65 to get their funds out of KiwiSaver without delay.
To me your comment was an irresponsible over-reaction scaremongering comment that needs to be called for what it was.
Can you acknowledge that your comment was not sound.
"capital decumulation by retired people will be accelerating." And not just retired people, and 'we' wonder why the famed Carnsoomer is cutting back on most things, expect essentials. Audaxes' link last night ( for those who caught it) illustrates exactly why lower rates and lower unemployment are confounding 'experts'. Those two are supposed to be mutually exclusive! More of both of those to come, as businesses who can't pay their staff higher/current wages let their staff go or - pay them less so they keep their job! More and more people with less and less to spend. Negative feedback to continue....Oh...and (stupidly) much lower interest rates to come; there is now no other viable option.
The exceedingly cheap money issue and apparently 'anti-saving' position of the banks makes me wonder. So I'll give the conspiracy theorists something to consider - is this some way to capture people into debt in a way that ultimately control of their life is lost? Somewhat Orwellian but if the savers are being actively discouraged, where is the money coming from? And if the lenders are happy to be effectively giving money out for bugger all return, what is in it for them? I doubt there is much altruism here so the possibilities are worrying!
It does seem ludicrous that after years and years of various governments lamenting continued poor saving by the public, it is now good policy and one is encouraged to borrow, more or less willy nilly, to stimulate the economy. To me that amounts to the same as using petrol to put out a fire.
Did someone say "conspiracy theorists"? Here...
Preservation of capitol is in the hands of the gods, And the future of money as we know it is circling down the debt hole.. so its hard assets all the way.
The key is future revenue... The banks just need a patsy to take the risk(or reward) and they have a payor for life, irregardless of the value of the asset.
So the game plan is... to get everyone in debt... Hows that?
Too simplistic. To take some other perspectives around the 'creation of money' - banks don't actually create money, they create a line of credit. But somewhere that credit must be backed up with something credible. It used to be gold, but today it is ...what? The banks give a line of credit to a borrower. This credit is used to buy something and that borrower pays the seller of a product some or all of that credit for that product. That credit appears in the sellers account as a part of the balance. Question; if the sellers balance is say $10,000, is it real money or just more credit? What happens if that individual rocks up to the bank and withdraws that $10,000 in cold hard cash, or in this case notes? Are those notes still credit or are they real money? When and how did they change?
Where is this going? If you and I have money in the bank, or should I say a positive bank balance, what happens if the system collapses? Is the man with cash better off than the man with a bank balance? To me it looks like the Governments have lost control. They did this when the ceded control to the banks by getting rid of the gold standard. How do we as the people regain control?
I view real money as the amount left over if you cancel all credit/debt in the financial system. What ever is left is either in currency or digital money and that is the actual money in the financial system. Your comment seems consistent with Ray Dalio's concept of the economy as a whole in the link below.
https://www.youtube.com/watch?v=PHe0bXAIuk0
For where this might all go see the section in the video on deleveraging the economy.
Think it's just that it does not benefit the financial industry at all for people to be living within their means, living in houses they've paid for, and saving money on top of that. Everything is aimed at having people pay increasingly more to the financial industry, whether it's in banking or insurance or investment advisors etc.
Rick it seems you and the other commenters don't want to explore motivations. I suggest it is obvious that the financial industry want people in debt, but at such low cost means apart from power over the debtor there is stuff all return on their money, which to me suggests there is other motivations. There are people behind the financial industry and some sources suggest it is a comparatively small group. I'll throw the conspiracy theorists another bone - are they the aspirants to be the 'new world order'? lending money is about putting spare money to work, and making a return of someone else's efforts. But lending money at close to zero interest or even negative interest produces not return, so why do it?
What if all the borrowers default ? Like all depositors withdrawing their savings ? Can they bankrupt every borrower and still keep the economy running ? Like national debts written off in the past, one day all these private debts will have to be written off and all savings will disappear overnight. Back to square one and a new start ? Can't come faster...
From a lender perspective, you can generate the same net financial outcome if you increase the total amount lent and reduce the cost of money to yourself. So it will not make a big difference to them. This can work for them if they are gambling with other people money and that they do not have to pay too much to get the needed money.
Well thank you for kaiboshing something that we had drummed into us for the past 3 generations .
Save , live within your means , be responsible with money , do for yourself what you can do for yourself and dont burden your Government .
Now we have done all those things and have a buffer of some money in bank ........... and its effectively worthless in terms of after-tax and inflation adjusted income
The Ant was still in a better position than the grasshopper when winter came and he had a nice stash of food. He didn't cry that he was not earning any interest on his food stash, he just ate it and filled his belly.
All those lessons still apply and your savings are still a buffer, just one you will have to diminish over time now you cannot live off the interest.
If you think someone with a million in savings but only receiving interest at the rate of inflation is the same or worse off with someone with no savings then feel free to send your $1m my way (my offer of 50 cents on the dollar always stands).
Don’t burden the government. Yes that is the rub. Are aware of a number of retirees intending to scrap Southern Cross etc. Reduced investment income something has got to give. Cut back on quality of nutrition too, heating as well? At that age and stage of life health problems likely compound and complicate. More burden for the public health system and hospitals, for sure.
There is a deep poverty culture in the US that savers and retirees could learn from. Most live out of a caravan or motorhome with expenses around $5k USD per year. You can have quite a good lifestyle without a mortgage, rates and the expenses of a house.
It does result in people disengaging from or having very little interaction with the economy. It's not great for the economy, but manipulating interest rates to unsustainable low levels will always result in harm to the economy. Maybe we shouldn't be providing such large scale social welfare for banks.
I'm sure that most retirees are very quickly coming to the conclusion that they cannot live off the interest any more like the good old days. So yep, just slowly use the savings up.
The gap between term deposit rates and Kiwibond rates is getting narrower, making the very safe Kiwibonds more attractive.
Am not sure where to turn for a half decent return. TD's are worthless, other than not losing them (provided the banks don't implode), house prices are static but it's fair to say we've done well until now, not keen on renters as we've had a bad experience in the past. I might have to try Bitcoin, or gold, or I could go back to 'horticulture on the quiet' - medicinal only of course.
You may want to think twice about bitcoin:
https://www.coindesk.com/bitcoin-price-may-test-7750-as-selling-pressur…
Binary options might be a better bet than Bitcon. At least you got half a chance. If you have cash you don't expect to spend in the foreseeable future there are still reasonable returning shares on the NZX that even if they slashed dividends 20% would be better than the bank. As long as you're ok with capital risk to get the return. The longer term economic impact of an ageing cohort doing stuff like cancelling their private health insurance and for example not having petrol money to volunteer in, and fully participate in their communities etc will not be seen for some years.
Same as always - diversify. Some property (usually over-represented if you own your house), some shares, some bonds, some cash, and maybe 5% for fun things like gold or bitcoin if you really must. Properly exposure can be bought through the share market by buying REITs, but they're fairly pricey at the moment.
People who were appropriately diversified a few years ago will have the same problem finding yield, but will be soothed by their bond and equity holdings giving very generous returns recently.
Investments are a bet that the future will deliver 'more
That was always going to cease, if the bets required even a partial physical underwrite. Even worse, if they required a concentrated-energy underwrite no available ex-fossil fuels.
So average returns on bets are plateauing, and will begin to turn negative. Just how long the system can be maintained (by mass belief) is the question. Mass delusion could cascade very quickly indeed.
Banks create money when they grant a loan: they invent a fictitious customer deposit, which the central bank and all users of our monetary system, consider to be ‘money’, indistinguishable from ‘real’ deposits not newly invented by the banks. Thus banks do not just grant credit, they create credit, and simultaneously they create money. Link
How about a guaranteed income fund like this - 5% income for life https://simplicity.kiwi/kiwisaver/funds/guaranteed-income-fund/
I took a look at this as it sounded too good to be true, and it is...
The return includes your capital, so if you invest $100k they can pay you $5k per year out of that for 20 years before they have even have to earn a cent of interest or dividend. This is a longevity product and I would personally write this product all day long to whatever sucker is interested.
The limited number of these annuity vehicles are appealing, but it really would help if when one looks at what happens if the insurance guarantee company fails (linked intuit FAQ) at
https://simplicity.kiwi/assets/Uploads/omi.pdf
didn't give a page not found error. Hopefully a website is the only thing they can't get right in a fairly difficult investing environment.
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