It's been more than a week since the RBNZ raised its Official Cash Rate for a fifth time in this cycle. And more are almost certain to come.
But after thinking about how to position themselves, banks are starting to push through some meaningful term deposit rate increases.
To be fair, most of the recent action has been by the challenger banks.
The latest is arguably the most impressive. SBS Bank has launched a new 4% rate for a one year term. Our records show that we haven't had a one year term deposit rate that high since 2015. It was in July that year when the main banks last had a 4% one year rate. By November that year, even the challenger banks had all abandoned that level.
Currently, the next-best rate for that one-year term is from Heartland Bank at 3.60%. Heartland and Rabobank offer 3.60% now for 18 months. For two years, the highest current offer is 3.85% from Rabobank. And Rabobank has a 4.15% three year offer, the only other 4%+ offer for terms out to three years. However, you can also get 4.00% from the Bank of China for five years, 4.00% for five years also from Kiwibank, Kookmin Bank, and Westpac.
Rabobank is higher for terms of four and five years with offers at 4.30% and 4.35% respectively.
Clearly, today's eye-catching offer won't be the last of them. We will be monitoring and reporting on these changes intensely from here, interested to find out how high this cycle can go.
The background wholesale swap rates signal the track is relentlessly up. And that suggests tomorrow's offers will be higher than today's offers.
An easy way to work out how much extra you can earn by switching is to use our full function deposit calculator. We have included it at the foot of this article. 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 after the recent increases.
| for a $25,000 deposit June 3, 2022 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 1.50 | 2.30 | 2.40 | 3.00 | 3.30 | 3.40 | 3.70 |
 |
AA- | 1.50 | 2.20 | 2.45 | 3.00 | 3.30 | 3.35 | 3.60 |
 |
AA- | 1.50 | 2.30 | 2.45 | 3.00 | 3.30 | 3.60 | 3.80 |
 |
A | 1.65 | 2.50 | 2.65 | 3.15 | 3.65 | 3.80 | |
 |
AA- | 1.50 | 2.30 | 2.45 | 3.00 | 3.20 | 3.50 | 3.80 |
| Other banks | ||||||||
| Bank of China | A | 1.90 | 2.70 | 3.00 | 3.50 | 3.55 | 3.60 | 3.80 |
| China Constr. Bank | A | 1.80 | 2.60 | 2.85 | 3.35 | 3.45 | 3.70 | 3.90 |
| Co-operative Bank | BBB | 1.20 | 2.30 | 2.45 | 3.00 | 3.30 | 3.55 | 3.80 |
 |
BBB | 1.75 | 3.00 | 3.00 | 3.60 | 3.60 | 3.60 | 3.80 |
| HSBC | AA- | 1.40 | 2.20 | 2.40 | 2.85 | 3.40 | 3.60 | |
| ICBC | A | 1.85 | 2.70 | 3.10 | 3.60 | 3.60 | 3.75 | 3.95 |
 |
A | 1.85 | 2.90 | 3.10 | 3.50 | 3.60 | 3.85 | 4.15 |
 |
BBB | 1.50 | 2.35 | 2.50 | 4.00 | 3.30 | 3.65 | 3.80 |
 |
A- | 1.50 | 2.20 | 2.50 | 3.00 | 3.20 | 3.40 | 3.70 |
Term deposit rates
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37 Comments
This only will add to the property market woes - whereby a rising TD rate lowers the attractiveness of rental property as a place to park your cash.
Even with the recent house price falls most rental properties are only delivering a 3-3.5% yield before expenses. After expenses (especially if not a new build) the average yield is less than 2%. With minimal prospect of capital gains in the next 3-5 years
Why go through the hassle of tenants,ongoing maintenance, EOY tax returns etc when you can put your money in a TD and just watch the interest stack up.
I think so. I've heard anecdotes about negative gearing, and how it was preferable to run them at a loss to avoid paying tax. Seems the end game was always about capital gains. Which is a scary thought if the entire system was geared for that.... if everyone was doing that....!
Banks need to maintain their levels of deposits relative to their lending otherwise they will run out of reserves in their exchange settlement accounts and will then have to borrow more from the central bank which is more expensive. Banks don't lend these reserves out though, they are only used to make payments between each other such as when bank A makes a loan but the payment ends up at bank B then reserves are exchanged between them.
Banks don't lend out customer deposits they create new money through their lending. https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creati…
Wouldnt you say that is shows you the lowest rate that they think they an offer you now in the current market to hold your money for a year?
Because they want to get as much money in now by making it look like a great deal, and that they only have to pay 4% on, rather than getting that same money 6 months further on but having to pay 4.5% because the OCR has gone up another 0.5-1%.
And that is not even considering inflation...
EDIT: upon re reading your comment I think you are saying it shows that they think it will be a lot higher than 4% in the future. Which I agree with.
BBB will have lower quality asset backing, eg loans approved in 30 minutes online, personal and car loans etc, Heartland incorporated a lot of this from Marac and PGC and others. Heartland has been operating very well to date however. The BBB players will love it when the government deposit guarantee for 100k per bank comes in next year or 2024? I guess it comes down to whether you think there is going to be a financial crisis or major world slowdown or not. If you dont want risk, the latest Kiwibond 4 year is a great rate.
Yes Rabobank has the best savings rates, and an A stable credit rating. There are headwinds for their clients, eg fuel, transport, labour, fertiliser inflation, but the food sector is still expected to perform on strong demand. The dairy payout is still forecast at $9, no problems there. I have funds in Rabo Premium Saver, its on call and 1.9%. Way above call rates at the big 4. The digipass is a good low cost way to keep your internet banking safe, probably saves them millions in IT costs! I will look at TDs at some stage in the next 6 months when a bit higher.
Thanks to you both for your replies.
We were fortunate enough to A. Have a home and B. To sell it in February. While we now rent and watch what happens, we’re trying to ensure we park our equity in a safe spot without going too quickly backwards due inflation.
cheers
I don't know why the government just don't bring in their deposit guarantee scheme now. NZ is one of the only countries in the OECD without any such protection. During the last GFC, they had to rush it in, and it did a great job. I recall they were seeing some worrying signs prior to bringing it in.
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"Happy days for savers"
Righto, so let's see, right now I can put my $100,000 savings (which I've already paid income tax on) in an SBS term deposit, earning 4% for a year.
My $4,000 interest gets another 28% tax taken out, leaving $2,880 net interest. So after a year I have $102,880 in my bank account.
But unfortunately inflation is running at 6.9% (and perhaps it will go higher), so my money is now effectively only worth $95,781.
Can't feel too happy about that I'm afraid!
For a more extreme example think back to the 80s, when people were happy earning nearly 20% on their term deposits - yet that was illusory too, as inflation was higher still.
Yes it was 20%+ term deposits. My late grandparents had sold their retail business in early '87 for a huge sum for the day. Bought a new house and the rest was parked in term deposit with National Bank. My late grandmother saw the writing on the wall and wouldn't let my grandfather put the rest of the proceeds into the sharemarket.
Plenty of people did buy houses with cash. My father bought his first section aged 22 with cash. Less than one years wages.
Looks like TD rates were a bit shy of 20% in the 80s:
https://teara.govt.nz/en/graph/23100/interest-rates-1966-2008
I think it's always been pretty hard to save for a house. Perhaps someone who bought a house in the 80s can comment.
My experience from the 90s was like this: I bought my first little flat in 1995 in Mount Eden for just under $160k. My IT salary was about $27k at the time. There was no KiwiSaver. It took me quite a long time to save up $15k, and I borrowed another $15k from my parents for the 20% deposit. My mortgage rate was about 12% and I got about $200 pw in rent (couldn't afford to live in it myself).
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