Term deposit rates are moving up, but not to levels for fixed terms that will attract many savers. However the lowest point may have past

ASB's dramatic mortgage rate hike for one and two year fixed terms is accompanied by some term deposit rate changes too, all increases as well.

Banks have been tweaking their term deposit rates in a minor way for the past few months. But with them at very low levels saver interest in these offers has dissolved away.

We can see that in the overall level of the banking industry household term deposit book.

On Wednesday Kiwibank raised its 200 day term deposit rate offer to 1.20%.

And ASB raised its six month offer to 1.00% along with all its offers from 18 months to five years. In fact, ASB's new five year offer is now 2.00%, the highest for that term for any bank. However, in a rising market (?) it seems very unlikely that many investors will be tempted to sign-up for such a long fixed term.

ASB also offers the highest market term deposit offers for 18 month terms and longer.

The highest short term rate is from Heartland Bank at 1.10% for a four month term.

The highest rate for any bank for a term about six months is now from Kiwibank with its 1.20%, 200 day offer.

The highest bank one year rate offer is from Rabobank at 1.35%.

Savers have been rejecting term deposits as a way to hold their savings. In the latest (May) household data from the Reserve Bank (S40), the level of funds held in term deposits fell by 18.8%, or $19 billion, from the same month in 2020. That is an accelerating decline, and the total in household term deposits is back to 2017 levels - and back then, they were growing at 14.7% pa.

It is not as though savers aren't saving at the bank - they are. Total household bank deposit balances rose 5.1% in the year to May, up to $204 billion, and at about the same year-on-year expansion we have seen for the past several months, up $10 billion. Only term deposits are being rejected.

One problem for savers is that the Reserve Bank offers banks money at the Official Cash Rate, currently 0.25%, and in theory banks have no need to pay savers more than this. But the hikes by ASB, and earlier by Rabobank, Heartland and others suggest that banks may be looking to retain their term deposit books and not let them atrophy further - because in the future they may need them when the Reserve Bank withdraws the Funding for Lending Programme.

Not in the table below are four and five year rates. Only ASB is now offering a 2.00% rate and the only bank to offer at that level.

One easy way to work out how much extra you can earn by switching is to use our full function deposit calculator. That will not only give you an after-tax result, you can tweak it for the added benefits of Term PIEs as well. It is better you have that extra interest than the bank.

The latest headline rate offers are in this table with the markings for changes this week so far.

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-	0.45	0.80	0.90	1.20	1.20	1.30	1.40
	AA-	0.45	1.00	0.90	1.20	1.25	1.40	1.70
	AA-	0.45	0.80	1.00	1.15	1.20	1.30	1.40
Kiwibank	A	0.45	1.20	0.95	1.15		1.15	1.30
	AA-	0.45	0.80	1.00	1.20	1.25	1.35	1.50
Other banks
Co-operative Bank	BBB	0.40	0.90	1.00	1.20	1.25	1.35	1.45
	BBB	1.10	1.05	0.90	1.35	1.15	1.20	1.35
HSBC Premier	AA-	0.45	0.80	0.90	0.80		0.90	1.10
ICBC	A	0.55	0.95	1.10	1.10	1.10	1.15	1.30
	A	0.40	1.25	1.10	1.35	1.25	1.35	1.50
	BBB	0.50	0.90	1.10	1.15	1.00	1.20	1.35
	A-	0.45	0.80	1.00	1.20	1.20	1.30	1.40