Challenger banks continue to push up one year term deposit offers, now as high as 4.2%, with five year offers out to 4.75%. But the 4% threshold hasn't yet been breached for terms under one year

Update: The table in this article has been updated to reflect a Friday, July 22, 2022 rate change from BNZ. Of note, their new nine month rate is 3.30%.

In this rising interest rate cycle, SBS Bank kicked off the "4%" offer series in early June with a one year term deposit (TD) offer. It was special then because the average main bank one year offer was just 3% with Kiwibank offering 3.15%.

But over the next seven weeks, "4%" has become the standard with even a main bank, ASB, offering 4.05% for a slightly longer term of 18 months.

"4%" is not yet available for any term less than one year, but a range of challenger banks are pushing the one year rate offers ever higher.

Kiwibank has come to the party among the main banks with a 4% one year offer. Now ICBC, China Construction Bank and the Bank of China offering 4.05% for one year, Rabobank is offering 4.15%, and the highest one year rate from any bank is now from Heartland at 4.20%.

If you go for a longer fixed term, the rates go up. Among the main banks, ASB's 4.35% looks good for three years. Among the challenger banks it is Rabobank's 4.55% for three years that stands out.

At the margin, Rabobank's 4.75% for five years is currently the highest term deposit rate on offer from any bank.

But as we have noted before, Kiwis aren't actually attracted to long rates. Most money is deposited in the 6 months to 9 month maturity. No bank currently offers a 4% rate in this duration. The best you can do is 3.85% at the Bank of China or the China Construction Bank, but you will require a $100,000 minimum deposit to access that.

But you can get 3.85% for a nine month TD at ICBC if you have set up an online account with them.

Other than these Chinese banks, Heartland's new 3.60% for six months is the next highest

Where will rates go from here? While you may think more hikes are on their way based on the expectation that the Reserve Bank (RBNZ) is expected to raise the Official Cash Rate all the way up to almost 4.0% by September next year from the 2.5% current level. That RBNZ signal has now become ANZ's expectation, although to be fair most other analysts don't yet see it topping out at 4%.

You are on your own as to what that might mean for term deposit offer rates. With global economic forces and fortunes changing daily, anyone who "knows" what the savings environment will be over the next twelve months will be no more reliable that using a dart board. If they get it right, it will be pure chance. But that doesn't mean you shouldn't have a view, a System 1/Thinking Fast view. What I am saying is that for all the effort, a Systems 2/Thinking Slow attempt is actually a dubious exercise when so much about what could transpire over the next year to affect it is unknowable. And that is also a reason you should be very sceptical about others who 'know'.

If you do take a position now, just try to not second-guess yourself as actual events play out. A considered decision made now with the best information you have is still "a good decision", even when hindsight can be applied.

Savers should also not forget about either inflation or taxes, both of which will 'steal' away real returns. As most readers will be well aware, we are still in a period of 'financial repression' where real after-tax returns are well below the inflation rate and probably will be for as long as the RBNZ struggles to contain the current high inflation impulse. Savers will be cheering on aggressive RBNZ efforts in this regard. (But they should also be careful for what they wish for - the effort to beat inflation may induce an economic recession as the price to be paid to win the battle. A 'soft landing' is what everyone wants, but the chances are not certain. It will require much skill and a good dose of luck.)

For all that, higher rates for savers will be welcomed by them. 'Higher' is always better than 'unchanged' or 'lower'.

An easy way to work out how much extra you can earn 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 (and especially if you are in the 39% tax bracket - PIEs are taxes at 28% flat).

The latest headline rate offers are in this table after the recent increases.

for a $25,000 deposit July 22, 2022	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	1.80	2.75	2.90	3.65	3.70	4.05	4.10
	AA-	1.85	2.85	3.00	3.90	4.00	4.10	4.35
	AA-	1.85	2.90	3.30	3.90	4.00	4.10	4.35
	A	1.85	2.85	3.00	4.00		4.10	4.20
	AA-	1.80	2.75	2.95	3.65	3.80	4.10	4.30
Other banks
China Constr. Bank	A	2.60	3.50	3.85	4.05	4.10	4.35	4.35
Co-operative Bank	BBB	1.80	2.80	3.00	3.65	3.80	4.10	4.30
Heartland Bank	BBB	1.80	3.60	3.45	4.20	3.80	4.10	4.20
HSBC	AA-	1.80	2.75	2.90	3.65		4.05	4.10
ICBC	A	2.50	3.50	3.85	4.05	4.05	4.30	4.40
	A	2.30	3.50	3.55	4.15	4.05	4.35	4.55
	BBB	1.80	2.75	2.90	3.65	3.65	4.05	4.30
	A-	1.75	3.05	3.00	3.65	3.75	4.05	4.10