Following some pointed observations by RBNZ Governor Orr, the first banks should have already responded with term deposit rate rises.
On Wednesday, following the RBNZ +50 bps rise to the OCR, wholesale swap rates rose about +10 bps across the curve - suggesting markets had not fully priced the rise as had been expected. In the few days subsequently, these rates have continued to rise. And the hawkish commentary suggests that even more RBNZ rises are coming, despite the widespread feeling that we are nearing the end of this hiking cycle.
The RBNZ is forecasting that Q1-2023 CPI will rise to 7.3% in an unexpected extension, as a consequence of the impact of the rebuild after Cyclone Gabrielle, but they still expect inflation to fall away fast later in the year.
But so far, neither home loan rates nor term deposit rates have changed. This is quite unusual following an outsized RBNZ rate hike.
Record bank profits have attracted the ire of the RBNZ, with Adrian Orr calling banks out over their term deposit rates, saying they haven't kept up with the general rise in his benchmark rate changes.
He is right (as you would expect). Banks are now offering rates at a significant discount to inflation, and that is historically unusual. We noted the same impact when we recently reviewed bonus saver rates. But it is equally true of term deposit rates.
However, Orr's point isn't so clear-cut when current term deposit rate offers are related to the OCR. It is still 'true', just less so. (And as you can see, it wasn't true in the years before 2009.)
From 2009 to 2020 banks pitched their six month term deposit rate at about +150 bps above the OCR. Since, the pitch has been barely +50 bps.
For their one year TD rate, the historic pitch has been a little higher, just under +200 bps with the recent levels more like +100 bps.
On that basis, it seems like the current six month term deposit offers should be more like 1% higher than they currently are. Which is basically Orr's point.
However, we should also note that the variances in the above charts are compared to the average of all banks. If you only focused on the five main banks, the variances would be larger. You can assess the 'penalty' for supporting a main bank from the table below. No main bank offers market leading term deposit rates. They may do for home loan rates, but not for savers.
There is one bank that does offer a higher term deposit rate at present. That is SBS Bank and their one year 6% rate. Rabobank comes close. But SBS Bank's offer is a full +60 bps higher than any main bank.
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 taxed at 28% flat.
The latest headline rate offers are in this table after the recent increases.
| for a $25,000 deposit February 25, 2023 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 3.80 | 4.70 | 5.15 | 5.30 | 5.25 | 5.20 | 5.10 |
 |
AA- | 3.80 | 4.80 | 5.20 | 5.30 | 5.25 | 5.25 | 5.30 |
 |
AA- | 3.80 | 4.80 | 5.20 | 5.30 | 5.25 | 5.25 | 5.25 |
 |
A | 3.80 | 4.80 | 5.10 | 5.40 | 5.25 | 5.25 | |
 |
AA- | 3.80 | 4.70 | 5.10 | 5.30 | 5.25 | 5.25 | 5.25 |
| Other banks | ||||||||
| China Constr. Bank | A | 3.95 | 5.10 | 5.50 | 5.75 | 5.35 | 5.35 | 5.35 |
| Co-operative Bank | BBB | 3.80 | 5.10 | 5.20 | 5.45 | 5.35 | 5.30 | 5.30 |
| Heartland Bank | BBB | 3.90 | 5.00 | 5.70 | 5.70 | 5.25 | 5.25 | 5.25 |
| HSBC | AA- | 3.70 | 4.75 | 5.10 | 5.30 | 5.15 | 5.10 | 5.10 |
| ICBC | A | 4.20 | 5.10 | 5.50 | 5.75 | 5.40 | 5.35 | 5.30 |
 |
A | 3.90 | 5.20 | 5.75 | 5.85 | 5.55 | 5.30 | 5.30 |
 |
BBB | 3.20 | 4.55 | 5.00 | 6.00 | 5.25 | 5.25 | 5.25 |
 |
A- | 3.80 | 5.00 | 5.15 | 5.40 | 5.20 | 5.25 | 5.25 |
Term deposit rates
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