ANZ offers 4% - but will it last?

Personal Finance / analysis

ANZ is the first main Aussie bank to offer 4% for a one year deposit as it raises TD rates across the board. They are following rivals but in the background swap rates are falling, and a few home loan rates are too

[updated]

27th Jul 22, 7:58pm by David Chaston

Source: 123rf.com Copyright: vectoroksana

ANZ is the latest bank to raise term deposit rates, but it has joined others in the past 24 hours who are taking similar action.

And ANZ is the first of the main Aussie banks to offer 4% for a one year term deposit. At this moment, it has this on its own among ASB, BNZ, and Westpac. Kiwibank is already there.

And it has a 3.30% nine month offer, matching BNZ.

But there is now a very large +70 bps premium for upgrading to 12 months.

Among the challenger banks there have been movements up too. But it is China Construction Bank leading the way with the highest across-the-board term deposit rate card. In fact, it now offers 4.80% for a five year term.

Heartland Bank also deserves a mention with its market-leading six month and one year offers.

These overall movements may seem a little odd, especially in the light of a number of banks actually reducing some home loan rates over the past day or so. The logic of rising TD rates and falling mortgage rates at the same time is hard to see and suggests one of these trends wont be sustainable.

Wholesale interest rates have been inching down over the past week or so, so it might be the term deposit rate rises that are exposed to an adjustment soon.

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 28, 2022	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	1.90	2.95	3.30	4.00	4.05	4.10	4.20
	AA-	1.85	2.85	3.00	3.90	4.00	4.10	4.35
	AA-	1.85	2.85	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	4.15	4.20	4.40	4.60
Co-operative Bank	BBB	1.80	2.85	3.00	3.90	4.00	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	3.00	3.00	3.90	4.00	4.05	4.30
	A-	1.85	3.05	3.00	3.90	4.00	4.10	4.30

This story has been updated to note that Kiwibank also offers 4%.

Term deposit rates

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Source: interest.co.nz

Term deposit calculator

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9 Comments

by the way | 27th Jul 22, 8:28pm 1658910520

It's starting to look a little better for the long suffering savers... O.8 now a distant memory.

by chebbo | 27th Jul 22, 8:58pm 1658912301

Treasury can't be too far behind with KiwiBond rate rises.

by HouseMouse | 27th Jul 22, 9:25pm 1658913902

I'll look at putting a bit of $ into term deposit once / if it gets to 5%.

by Carlos67 | 27th Jul 22, 11:11pm 1658920299

5% before Christmas. FED announcement tomorrow?

by linklater01 | 28th Jul 22, 8:58am 1658955498

H M,

The UST 10yr yield started today at 2.77% and down -2 bps from this time yesterday. Then after the Fed press conference it slid further, down another -4 bps. The UST 2-10 rate curve is marginally more inverted today, now at -28 bps and their 1-5 curve is also more inverted at -22 bps

But will rates reach 5%? The bond market seems to be saying something else.

by Markus | 28th Jul 22, 11:27am 1658964473

Yes, i agree with you, and this seems in line with what the article is saying - that either rates will rise or will fall together in the long term, but currently the trend for deposit rates is up whilst swap rates (determining mortgage rates) seem to be correcting down. This presents a margin squeeze for banks which is not sustainable and must be resolved one way or the other.

The way I read the swap rate corrections (also similarly present in EUR Bund futures where the yield is falling), is that the market seems to be thinking that the economies cannot handle the steep interest rate hikes of the past months. This is exactly what I think, too. Any further OCR hikes, by the FED or by the RBNZ or by the Australian Reserve Bank, are bound to kill the economy, leading to a chain of credit defaults.

So I hope the RBNZ will correct its course and bring the OCR back down, perhaps to 1 or 2% p.a. I think we all agree on this forum that 0.25% was far too low, but the current rate of 2.5% is too high in my opinion, given the over-indebtedness of our economy.

In terms of investing in term deposits - the real net income after inflation and tax will, in my opinion, almost always remain negative. Of course, in times of economic contraction, alternatives are hard to find, I realise that. Perhaps some picks on the stock market - food producers, commodity producers, dividend stocks may fare relatively well even in times of recession, and if one is able to find the bottom or thereabouts, this could turn out to be a good investment, both in terms of capital gains and cashflow via dividends. The question is, can one find the bottom or thereabouts, much will depend on whether our central banks are hellbent to drive us into a 1929-style depression, or whether they will relent and ease the OCR.

God bless.

by Rumpole | 28th Jul 22, 12:54pm 1658969683

Markus - Correct identification of the issue so if rates go down compared with other countries the NZ$ has an outflow to better returns and vice versa so a tough decision for any Reserve Bank, my gut feel is the fed will go another 1% and the US will have recession which will contage the world and as liquidity is withdrawn TD rates will increase as Banks suffer liquidity problems. Another issue is if asset values fall and defaults are significant Banks may be forced to mark to market the same class of assets creating negative equity and Banks may be forced to ask for an equity top up or force Mortgagee sale unless Govt creates some mitigating legislation. An early indicator in the US is increasing car loan defaults. We are truly facing a perfect storm of the type not seen before.

by Markus | 28th Jul 22, 1:02pm 1658970175

Wow, thank you Rumpole, deep insights and sobering to read. Many thanks!

by dunnock | 28th Jul 22, 11:38am 1658965086

I have been watching Liberty financial for some time and until Tuesday they had made no upwards move on their deposit interest rates. Their move upward from 3.4 to 5.55% on 5 year TDs of $100k was a clear sign that they think interest rates are not yet finished rising. Since they are professionals in the finance market with BBB- credit rating I think they may have a better feel for the market than casual bloggers.