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New Zealand's largest bank comes through with some modest term deposit rises, essentially matching those its rivals have already adopted. Just ignore the inflation comparison (and tax) to remain sane

New Zealand's largest bank comes through with some modest term deposit rises, essentially matching those its rivals have already adopted. Just ignore the inflation comparison (and tax) to remain sane

ANZ has raised its term deposit offers to bring them more into line with the market moves of its main rivals, with increases ranging from +0.15% to +0.20% across a range of selected terms.

But one of their offers stands out. Among the big five banks for terms less than one year, the highest rate is 1.05% offered by ANZ's updated offer.

However, among all banks for terms less than one year, the highest rate is 1.25% offered by Rabobank for six months. Heartland's 0.95% for four months also stands out.

Among the big five banks for a term of one year, all the majors are offering 1.20%.

Among all banks for a term of one year, the 1.35% offered by Rabobank is out on its own.

Increases in term deposit rates are coming as banks raise their offers to mortgage borrowers.

But 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 ANZ, and earlier by ASB, 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 and Westpac are now offering a 2.00% rate and the only banks to offer at that level. ANZ's five year rate is up +20 bps to 1.95% pa.

But with inflation running at over 3% and ANZ today saying it could top 4% before it retraces, term deposit rates at current levels are not attractive for savers. Take out income taxes and they are even less attractive. They may be better than nothing but that is a defeatist standard, and there are other alternatives, even it they do have higher risks.

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
8 - 11
  1 yr   18mths 2 yrs 3 yrs
Main banks                
ANZ AA- 0.45 1.00
1.20 1.20 1.45
ASB 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 1.35 1.50
Kiwibank A 0.45 0.90 0.95 1.15   1.15 1.30
Westpac AA- 0.45 0.80 1.00 1.20 1.25 1.45 1.70
Other banks                
Co-operative Bank BBB 0.40 0.90 1.00 1.20 1.25 1.35 1.45
Heartland Bank BBB 0.95 1.00 0.90 1.30 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
Rabobank A 0.40 1.25 1.10 1.35 1.25 1.35 1.50
SBS Bank 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

Term deposit rates

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The current trend is rising rates and that all that really matters here. Managed to get 1.55% to bridge the current hole so hopefully rates will be back at that level in August.

The government tax revenue on TDs is down about a billion from when there was about 100 billion on about 4% a few years back.

We track that sort of data from the gritty detail in the Crown Accounts. RWT on interest (all interest paid to companies and individuals, not just TDs) maxed out at $1.8 bln in a year in 2015. It fell to about $1.6 bln per year in 2020. In 2022 it has fallen further to about $1.2 bln per year. So the decline depends on where you measure it from, but it is about half your claim, at its max.

Thanks David, I may have been a bit crude:
180 bill x 4.5% x 0.3 versus 160 bill x 1% x 0.3.
There must be long terms still holding it up.

I am looking for a similar funding...for Tiddlywinks Super Special Labour Supported World Flipping
Champion -Ship

Any Takers??.

My Bad!...I meant..Taxpayers ya muggins...Not Labour.

Thats alot of money for a feel good event.

essentially every Aucklander (man, women and child) paid $200 towards the event. Thank you team of 1million

At least we won it otherwise I would feel even worse about it

Looks like TSB is the most consistent with their interest spreads between mortgages and TDs.

ANZ and ASB seem to be the priciest to bank with before fees.

Rates are still too low- consumers are literally paying the banks to hold their money.

Annualised since April 1 for me:

Corporate Bond Fund: -0.65% (yes, that's negative).
Managed Cash fund: 0.49%

(There's no reason to be in bonds over next decade, I've just left a small amount here compared to what I once had, and have three times the bond amount in the Cash Fund to hedge each other. But not even close to keeping up with inflation; only staying here for market risk off, and money on sidelines for after the coming equities market crash - no, I don't know the timing of that with the FED prepared to be as reckless as has ended up).

My best current term deposit: 1 year at 1%

It's hopeless for savers. So yes, I've gone to much higher risk for my age than I am comfortable with: commercial property which has been great (really great), but valuations will be hit on rising interest rates, so I have the same amount in a mortgage fund (currently doing 4.74% annualised) to future hedge the commercial property, but while taking the 6.7% yield from property), plus a little money in a ASX/NZX actively managed equities Long Short Fund on 4.32% annualised (20% last year) ... I still won't go into long share funds here or (certainly) US and EU or Asia until a correction which has to be a crash out of US at this stage. I can't afford to lose 50% of my savings at my age.

I've also been building physical gold (via PAXG) ... the best use of Crypto.

How on earth are pension funds, etc, surviving in this stimulunatic environment?

(And I put my investments up for general interest: I'm always interested in other investor approaches: but no, I'm not interested in reckons on how dumb my approach may be from know it alls with no skin in markets.)

Real negative term deposit rates. No wonder savers are looking to real estate.

Convert it into a USD stable coin such as USDC, TUSD, Paxos and deposit it with Celsius, nexo or a few other interest providing platforms and get 8.5-10% interest.
Spread your risk between the types of stable coins and platforms, just avoid USDT (tether) for long term savings.

Yes, been looking into that Galloleous, but I'm giving it a bit of time for DeFi to 'settle' in, and ensure the defi company I put my PAXG over to (if I do) is still going to be there to give it back to me :) It will either be Celsius or Blockfi, most likely Celsius: both offer about 14% on PAXG (but that means high risk).

These arn't defi by the way. they are centrally run businesses that follow all the relevant legislations and reporting laws of their jurisdictions (Blockfi is US and Celsius is London)

I have been using them for coming up on 3 years or so now. Never had any problems with either of them. Have a few loans with Celsius as well and they give you plenty of time to add collateral before they start liquidating you, so not just money hungry.
I have been shifting my BTC off Blockfi recently with their dropping rates and max limits. So also have Ledn and Nexo going too for some savings.
Feel free to use my ref code for Blockfi, deposit $100USd or more and we both get $10 in BTC
Celsius: Deposit $400 or more and we both get $40 in BTC (good 10% return, just have to leave it there for 30 days) Code: 149810d003

Any other questions feel free to ask :)

Interesting. Thanks for this. Yeah I realise they're centralised businesses. I think I trust Celsius over Blockfi. Nice to find someone using using them for that length of time.

Do you know how well their model works if BTC collapses? The best rates are on PAXG (or the other stablecoins) so I might consider putting just a little over to see how easy it is to arrange: did you have to go through a lot of AML rigmarole?

Also, do they only pay yield in BTC, or if I deposit PAXG will they pay yield in PAXG (or any other stable coin)?

How about this approach; "Over the last 15 years I've done really well, initially with property but most recently with shares. I'm not happy, but I can live with my current mix of TDs and ETFs. Whilst I'm keeping pace with inflation (whatever that may be), I'm not going backwards and I can move quickly should markets or property suddenly drop." Chasing returns year after year sounds risky. Good luck.

"I'm not going backwards..."
Well by keeping your money in term deposits or cash that is literally what you are doing... going backwards in purchasing power.
And how do we actually know what inflation is when we all know the CPI is a joke (which you alluded to).
Each person has their own acceptable risk levels and will allocate appropriately.

The ETFs offset the TDs (retail and Gov). My crude maths with a 50/50 split across these 2 classes shows a return of approx 5% after fees and tax since 2018. IIRC it was sig better in the years prior with a higher weighting to markets. I've wrongly assumed property would correct a tad and wanted to be able to move. Regardless, I sleep easy at night.

I too was waiting for the property dip, but decided to just jump in last october anyway. I can handle a dip so not worried.
Thats all anyone wants to do, sleep easy :)

They started in 2017 so have been through the previous 3 year bear market, so they have survived that trial by fire.
AML is pretty easy, just the standard stuff. Blockfi uses the face scanner app thing for verification so pretty fancy.
I like the look of the Blockfi debit card, looking forward to earning BTC back on all my purchases. once it reaches me at my 100,000 position on the waiting list haha

As for earning. You can either earn in the native token (BTC on BTC) or in CEL (at a higher rate). The Cel token has done really well and will continue to perform well I think.