ASB tests the low end of term deposit offer ranges with a range of cuts up to -20 bps. Other banks sure to follow and loan demand is expected to dive and mortgage rates fall

ASB tests the low end of term deposit offer ranges with a range of cuts up to -20 bps. Other banks sure to follow and loan demand is expected to dive and mortgage rates fall

Falling mortgage rates have had a strong echo in falling term deposit rates.

Last week, our biggest bank, ANZ, reduced its term deposit rates for terms of one year and longer to 2.35%.

And now one of their biggest rivals, ASB, as reduced its 1+ year offers to just 2.25%.

That has opened an unusual situation where Westpac now has the highest 1+ year rates at 2.50%, unusual because Westpac has traditionally been the low-baller.

BNZ and Kiwibank are between the high and low levels of the others.

But expect all these rates to fall further.

The highest rates are for terms less than one year. And the biggest variation is in these rates too.

For example, Kiwibank (Update: now withdrawn) and Rabobank offers 2.70% for six months and Heartland is still offering 2.80% for six months. But ASB is now down to 2.30% and HSBC is down to 1.80%. The ASB-Heartland variance is 50 bps.

The highest term deposit rate on offer at present is the 2.80% pa offers from Chinese bank ICBC across most terms. But Heartland Bank has some 2.80% offers still on the table.

Banks however are also facing diving loan demand.

This tension between the need to keep depositors from withdrawing and yet not needing a flood of new money puts retail investors on the back foot - especially as there is little real competition by banks for their loyalty and no depositor has any real power. There are squillions of investors and only ten retail banks, but only five are market significant. There is a negotiating imbalance that works against customers at this time.


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The best you can do is keep an eye out for good deals and go as long as you feel comfortable with, if you have decided to keep funds in TDs. (There is zero point keeping any funds in savings accounts - interest is trending to 0.05% pa in these floating "yesterday" accounts.

The table below suggests that 2.65%-2.80% for eighteen months could be a good deal over that time. Higher rates are on offer for shorter terms but expectations won't be high that any of them will last.

And when deposit guarantees are instituted (it is Government policy to bring them in, even at a modest level) that will put further downward pressure on TD offer rates. In every other country where deposit guarantees are in place, TD offer rates are very much lower than in New Zealand. There is no reason to expect that to be different here when the promised guarantee is in place. And depending on the stresses the banking system may face, the guarantee system could be rolled out quickly here - recall it was an 'overnight' decision the last time it was used.

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 and marking the changes this week.

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- 2.00 2.40 2.40 2.35 2.35 2.35 2.35
ASB AA- 1.80 2.30 2.45 2.30 2.25 2.25 2.25
AA- 2.00 2.45 2.55 2.40 2.65 2.40 2.40
Kiwibank A 2.00 2.50 2.50 2.50   2.40 2.40
Westpac AA- 2.15 2.50 2.65 2.50 2.70 2.50 2.50
Other banks                
Co-operative Bank BBB 1.75 2.55 2.40 2.55 2.40 2.45 2.50
Heartland Bank BBB 2.25 2.80 2.80 2.75 2.70 2.70 2.70
HSBC Premier AA- 1.50 1.80 1.80 1.80   1.85 1.85
ICBC A 2.45 2.80 2.80 2.80 2.80 2.80 2.80
Rabobank A 2.45 2.70 2.65 2.55 2.50 2.50 2.50
RaboDirect BBB 2.25 2.65 2.65 2.50 2.50 2.50 2.50
A- 2.00 2.50 2.50 2.60 2.65 2.60 2.60

Term deposit rates

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34 Comments

That is a sure wrong expectation with regards to Loan, Dave. Kiwis will surely in drove to take that advantages of lower mortgage rates... all funds idle stored in deposit, not earning anything. Shall find a way out to the RE, so as result? in all theory and probability.. the loan should go up, up and away. Lost job? mortgage difficulty? ... the wages subsidy come, mortgage holiday is follow suit. Heaps tools & materials around to keep the boat float.

"Hello, Bank! I'd like to take out a mortgage to buy another house please".
Banks answer?
"Not at the moment. We don't know what the house is really worth in this market or will be for quite some time. Nor do we know if we can raise the funds to refinance your loan. Offshore Funds are getting a bit uncertain at the moment. Come back in a few months time. Sorry"

bw, nice story, right out of your imagination. You haven't asked the bank for a mortgage have you? Banks do still want to lend, provided the borrower is not in a dire position.

Which of our banks have the highest exposure to mortgages?

ANZ isn't it, on a gross loans outstanding basis?

The banks here have their asses covered by the way they operate. If house prices tumble and your forced to sell they get their cut before you do. You will either have the option to continue to pay the mortgage on a house that is no longer worth what you paid for it and hopefully play the long game in which it recovers to what you paid for it or go mortgagee sale. The huge RV gains in 2016 of 46% in Auckland was all money that did not exist just like the stock market so I don't see why equally high price falls would be seen as impossible to some people.

I think there's still significant denial in a few camps of the current risk to property prices - but hey. I guess you need to live through a decent crash in property values before you admit that it can happen.

Independent Observer
The denial is in their lips. But, in their heart?? Maybe thudding with anxiety!!!

I also think that unlike in the US, banks here can proceed against the other assets of the borrowers, if the proceeds of the mortgagee sale is not enought to wipe out the debt. No Jingle Mail possible here.

Jingle mail was not common in the US either.. not many states allowed it, and if they did only on some mortgages. Its almost reached urban myth status.

Auckland property values fell up to 30% in 1989-1991, that is a fact. The higher the value, the bigger the decrease. Low-end properties hardly fell at all. I was valuing in this market, so know what happened.

Except auckland has been flat and falling for 3 years now. Its the tourist and air-bnb holiday spots that have been surging and will feel the most pain

Carlos67. Spot-on.The huge RV you referred is council's way of stroking houseowners to feel good that their asset has appreciated. While stealthily stinging them with rate increases.And some convulated way of explaining how this translates into actual rate payments .An increase in all cases. Never ever heard of anyone saying their rate payments have decreased!!

In terms of $ exposure, it is ANZ as our largest bank.

In terms of % of all assets, its Kiwibank among the main retail banks.

Data is here. See G category of Asset Quality.

Thanks David.

All the current helicopter money is doing is just pushing the problem out a few more months. We are at the edge of the cliff and all the lower rates are encouraging us to do is to lean out over the edge of it and borrow even more. The chances of all this going bad is increasing by the week. Personally my money is staying in TD's, the risks elsewhere is growing. As someone else here already pointed out its now about hanging on to what you have not trying to make gains.

I'm no longer sure the interest rate covers the risks so am letting all of mine mature and am opening accounts with multiple banks to spread the risk. Might get some cash as an apocalypse option as well.

Same here. Strange times we live in. Hope you and your family are well, Ex.

My family and I are in a good space, Rick. Like others we are trying to digest what is happening and what it means long term. Unlike many others we were not caught out by the markets, more by innate conservatism than conscious effort but it’s difficult to work out what to do next. We want equities for the long term but when to buy?

Agree...and when/what to buy becomes the toughy, for us too. Interesting times for job security too, though I suspect you might face some pretty good prospects there in coming months. Best of luck.

You can never know precisely when is the best time to buy. I happen to think that right now is pretty reasonable buying given that the Dow has been wound back about 3 years. But I also think it's going to get better (for buyers). My solution has been to trickle some funds into equities over the last couple of weeks, but keeping a decent amount of funds in reserve.

Let's recall.....South Canterbury Finance - not even a registered bank. Depositors in that esteemed institution were due back about 25cents in the dollar. How much did they get via a Government bailout? $1 in the Dollar.
So if, say, ANZ hits the skids, the chances of it absorbing depositors term deposit money is minuscule.
They'll be 'SCF'ed at the very least.
If New Zealand doesn't rescue its banking system, and by extension, it's depositor funds, in a crisis, there is no New Zealand. We can't work without such.

Yes Air NZ has shown the way.
I see the govt favouring a Kiwibank bailout over the Ozzies, but only slightly.
In the SCF case, it is interesting that the company essentially threw the money away. I hope that the govt is more vigilant with respect with what businesses do with their money. Not continuing share buybacks is an obvious one but there must be 1000 ways they can funnel money into their boards, shareholders and management.

Any thoughts on bonus bonds vs TDs in the event of an OBR?

Bonus bonds are a “managed investment scheme”, and there’s no guarantee you’ll get $1 back for every $1 you put in, even in normal times.
Couple of salient points from their disclosure statement http://bonusbonds.co.nz/pdfs/productDisclosureStatement.pdf

“You’ll currently get $1 for each Bonus Bond you cash-in. We can change this amount, but have never done so.“; and
“In limited circumstances, we have the right to suspend or delay cash-in requests.”

Same here. Currency and Gold (physical via the Perth Mint).

Good luck funding those under-priced loans!

Imagine you are a cash-rich bank while chaos rages all around you. Risk-averse, absolutely, therefore you want the highest, best possible security for your cash. The best quality collateral, that is.

In other words, you’ve got spare cash and don’t mind carefully parcelling it out but you can’t find any takers. Not for lack of willingness, mind you; it’s a crisis, after all, and the line is out the door. Counterparties would love to borrow every last nickel you’d offer, but they can’t because you’ll only accept the highest quality collateral in return which they don’t have and can’t get.

(JP Snider)

ANZ forecast

New Zealand Q2 GDP to fall 17% q/q (annualised)
2020 GDP in total to fall 5.5%
Unemployment rate to 8.6%.

That's really, really optimistic. We know that the tourism industry is basically dead for the next year at least, probably 2 however. I just can't imagine borders are just going to re-open again until almost the entire world is COVID-19 free. We know that tourists will try and get away from their country if it's not completely gone from their own country and it is gone from ours. But how likely is our country to let them in without a forced quarantine? And who would want to go on a holiday where you are forced to quarantine for at least 2 weeks in a country before you can travel around. And then coming back to your own country (if it's not gone from the countries you visited or transited in), your own country will probably put you into forced quarantine on return.

Tourism both direct/indirect employs 14.4% of all workers in NZ. If the industry is near enough to dead (it may only service internal travelers for a while), IMO we are talking about at least 10% of people unemployed. This is without factoring in other industry losses...

the doom and gloomers on interest,co think that they are experts on property prices!
They have been wrong about prices for the past decade at least!
Yes there will be some people that need to sell to get money out to support their businesses but there will also be many people who know that housing is the safest investment.
What I do know is that the ChCh market will not plunge whatsoever as zi have many times stated that it was the soundest property market in nZ bar none.
Once the lockdown is lifted there will be plenty of people wanting to get back on with life and will certainly be wanting a new home.
Yes there will be many that will now not be able to buy, now that their KiwiSaver accounts have taken a hit, but to be fair most people must’ve known that the equities market was going to get a hammering at some stage as it always does.
Housing is a necessity and will always continue to be.
Will be interesting to see if this govt. continues with the many stupid changes to the RTA?

ChCh is probably more sound than others because it's been less irrationally exuberant than others.

What will be interesting is of that 14.4% how many are actually locals vs. short-term imported labour (which might leave NZ). I.e. post-GFC Ireland.

Have been reading everything I can re the situation which is changing by the hour. I too have my money in TD's on the basis that I should get it back, hopefully. If the banks go then we're all gone & that's beyond my control. I still believe the media have been playing the virus card to the max & I still believe that once this has passed, they will have a lot to answer for. Our pollies are f.......g useless at the best of times & are following the media mantra, backed up by the crooked universities ''scientificness'' which if you scrape away the top layer, you will know is all about the money & the power at the end. This is democracy's socialist moment & so far we're failing.

All our $$ is in Milford PIEs. Couldn’t miss over the last 10years, ignorance was bliss. Now they are tanking we thinking take out 50% and put it in TDs to preserve the capital, realise the gain, stop the loss, any other buzzword.
But this OBR makes me nervous, is it better the devil you know?

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