Being offered 5.50% for a one year term deposit is starting to get 'interesting'.
That rate is available from Rabobank. And in fact that rate is also available from SBS Bank for a nine month term.
Behind these two challenger banks, most of the main banks are offering rates above 5% pa also. BNZ and ASB also offer 5% for a nine month term.
What makes these new higher levels 'interesting' is that they are going up, just as you can sense that inflation is reducing.
CPI inflation was 7.2% as at September. Since then it has probably reduced, if only because petrol prices have fallen, and the NZ dollar has risen, both noticeably. Globally, the inflation impulse, while still high, seems to be moderating. That could well flow into New Zealand in the December quarter, and into 2023.
So, if we have rising term deposit rates and falling inflation, we have the prospect that 'real' interest rates could turn positive in the investable future.
We are certainly not there yet, but the prospect is real.
We have had three years of significant negative rates facing term deposit savers. That has been the longest stretch they have had to put up with since we started tracking term deposits in 2002.
If history showed a 'normal', it would probably mean that term deposit rates run at +2% above inflation. The RBNZ is assuming an average 6.4% inflation rate in 2023. But it seems unlikely 'normal' will return next year.
Wholesale interest rates have been energised by the unexpectedly strong Q3-GDP result, pushing swap rates up sharply in the past few days. Q4-GDP may also be better than expected if the re-opened borders continue to deliver the gains we saw in Q3. If those wholesale rates stay up, that will certainly underpin the current higher term deposit interest rates. But what is really required for them to stay up is stronger loan demand, and that looks less likely from the main driver, the housing market, through most of most of 2023. Many economists think we are in for a 2023 recession now.
Of course, there is one large factor we haven't discussed - tax. Investors only get a positive 'real' return when it appears on an after-tax basis. Tax makes the prospect more remote for 2023. But is also true that savers are very motivated by higher interest rates, shifting billions out of at-call and low-yielding savings accounts into higher yielding term deposits
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, 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 December 16, 2022 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 2.70 | 4.35 | 4.70 | 5.10 | 5.10 | 5.15 | 5.20 |
 |
AA- | 3.20 | 4.45 | 5.00 | 5.20 | 5.20 | 5.25 | 5.30 |
 |
AA- | 3.20 | 4.50 | 5.10 | 5.20 | 5.20 | 5.20 | 5.20 |
 |
A | 3.20 | 4.45 | 4.70 | 5.20 | 5.25 | 5.25 | |
 |
AA- | 3.10 | 4.45 | 4.70 | 5.20 | 5.25 | 5.30 | 5.30 |
| Other banks | ||||||||
| China Constr. Bank | A | 3.65 | 4.70 | 5.00 | 5.30 | 5.35 | 5.35 | 5.35 |
| Co-operative Bank | BBB | 3.00 | 4.55 | 5.00 | 5.25 | 5.25 | 5.30 | 5.30 |
| Heartland Bank | BBB | 2.80 | 4.75 | 5.10 | 5.30 | 5.10 | 5.20 | 5.20 |
| HSBC | AA- | 2.95 | 4.25 | 4.60 | 4.90 | 4.90 | 4.90 | 4.90 |
| ICBC | A | 3.65 | 4.45 | 4.75 | 5.25 | 5.25 | 5.25 | 5.25 |
 |
A | 3.20 | 4.60 | 5.00 | 5.50 | 5.25 | 5.30 | 5.30 |
 |
BBB | 2.70 | 4.05 | 5.50 | 5.00 | 5.10 | 5.15 | 5.20 |
 |
A- | 3.45 | 4.45 | 4.70 | 5.15 | 5.15 | 5.15 | 5.20 |
Term deposit rates
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