BNZ reverses the trend of ever lower term deposit rate offers with a Chinese New Year 'special' that is close to the best offer in the market for any bank

BNZ reverses the trend of ever lower term deposit rate offers with a Chinese New Year 'special' that is close to the best offer in the market for any bank

You know Chinese New Year is approaching - banks are starting to change some TD rates to end in an '8'.

The first to do so this year is BNZ who have launched a one year 'special' at 2.88%.

And it is a worthwhile 'special' because it has raised its offer by +28 bps from 2.60%

At 2.88%, that makes it nearly the highest one year offer from any New Zealand bank for this term, pipped only by Heartland Bank's 15 month 2.90% offer.

And at BNZ, interest can be paid as often as monthly.

In fact, apart from an offer from the specialist Indian branch of the Bank of Baroda, or Kookmin Bank's $100,000 four and five year terms, BNZ's 2.88% is the highest rate currently on offer from any bank for any term.

It comes at a time when one year wholesale swap rates have risen +4 bps in the past week, and have risen +30 bps in the past three months. Back at the low point in mid-October, BNZ had its one year term deposit offer at 2.60%, when it was first reduced to this level.

The average bank one year term deposit rate is currently 2.58%, and all-time record low and still trending down, although this new BNZ rate will take it up marginally to an average of 2.60%.

Analysts are expecting the December 2019 CPI level to show inflation rising. This data will be released at 10:45am on Friday. Kiwibank economists expect annual inflation to come in at 1.7%, ASB and Westpac economists expect 1.8%, and ANZ economists forecast 1.9%. BNZ economists have picked 1.8%.

If it does come in at +1.8%, for taxpayers on a 33% marginal tax rate, the new BNZ one year rate will deliver a tiny +0.13% tax-paid, real return. Taxpayers on a 30% marginal rate, the same real return would rise to +0.22%. For those on the 17.5% marginal rate, the real return would be +0.58% pa.

It is positive that this BNZ 'special' turns the tide of ever lower rates, higher. It is a move than many may not have expected in early 2020.

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 now available.

That the Government now offers Kiwi Bonds at a -80 bps discount to inflation is not a great signal to those who need low-risk interest income.

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- 2.25 2.65 2.65 2.60 2.60 2.60 2.60
ASB AA- 2.15 2.55 2.60 2.55 2.50 2.50 2.50
AA- 2.25 2.70 2.65 2.88 2.50 2.50 2.50
Kiwibank A 2.25 2.65 2.65 2.60   2.50 2.50
Westpac AA- 2.25 2.65 2.70 2.60 2.60 2.60 2.60
Other banks                
Co-operative Bank BBB 2.05 2.60 2.60 2.60 2.50 2.50 2.50
Heartland Bank 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
Rabobank A 2.05 2.70 2.65 2.55 2.50 2.50 2.50
RaboDirect BBB 2.25 2.70 2.70 2.60 2.60 2.60 2.60
A- 2.25 2.60 2.65 2.60 2.60 2.60 2.60

* = 15 months

Term deposit rates

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Apologies, off the actual subject here I know, but has anybody else out there heard a whisper that the government might use Kiwi Bank as a vehicle to buy back BNZ?

That was a speculation in a Stuff article of a few weeks ago when news was light over the holiday break. And even the person who floated it (Sam Stubbs) didn't actually think it was likely. There is zero reason NAB would want or need to sell. BNZ stars in their system.

And if it ever did happen, the relative sizes of the two organisations would mean that it would practically be a reverse takeover by BNZ management of Kiwibank ...

Tks David & understood. Can’t change history but in terms of idle speculation wonder how it might have out turned if the BNZ had been bailed out and retained in a similar manner and rationale , to Air NZ many years later or would it be that the parent NAB has actually been the key to its existing success.

Should have made it 8.88%.

And lose money on their 1 year mortgages at 3.49%. Yeah right.

Is there any reason that they couldn't make it 8.88% and only allow it to be loaned out as credit card finance thereby gettin a good return.?

The rate is so high due to so many credit card payment defaults. Most depositors in banks want low risk. If you want a higher return try P2P lending (e.g. Harmony 13-14%).

I remember actually getting an 8.88% TD rate (CNY special) from Westpac, circa 2008

what if you had to choose between 2.88% and 4.44%?

Is it any wonder people have been piling into the share market? +29% in the past year. That'll be a short term trap of course, much nearer the end of a cycle than the beginning.

Can't the Govt's Kiwi Bonds can be redeemed at any time? If so they possibly would be better compared with call account rates.

Possibly, but if you do it through a broker then 0.75% or so brokerage will sting a bit.