A 6% term deposit offer rate is spreading, for now at least.
Now TSB is offering it for a one year term.
They join Heartland Bank and Rabobank with a 6% one year TD offer*. But that makes TSB the largest bank so far to offer that rate.
The closest major bank is 5.75% for one year from Kiwibank. All the big Aussie banks are on 5.70%.
The most competitive ~3 month rate is China Construction Bank's 4.70% for 4 months.
The most competitive ~6 month rates are 5.60% from the Bank of China, China Construction Bank, and Rabobank.
At the ~9 month range, Westpac's 5.50% is good for an 8 month term. But Rabobank offers 5.90% for 9 months, closely followed by Heartland Bank, and those two Chinese banks, all with offers higher in that range than Westpac.
But 6% at 12 months is kind of the peak right now, and rates for terms longer than that are tending to show some softness. Not only are all of them lower, the background trend is for lower rates. Certainly that is what wholesale rate pricing has been showing recently. The long end is influenced heavily by international markets, and rates have topped out there across the globe.
But the risks to banks offering 6% isn't high. Most savers much prefer 90 day to 9 month terms. A 6% offer might start a conversation at a bank, but most savers will probably opt for a shorter term when they are forced to make a decision. Banks know this; it is a Kiwi saving behaviour that has been around for decades. The one year term isn't as popular as it might seem. But those who favor layering their TD savings across terms and institutions could well be attracted.
Are these short-term rate offers of one year and less enough to satisfy the RBNZ and its call for better offers to savers? Who knows? Savers who go short are their own worst enemy. But if the current levels hold while wholesale rates slip, perhaps they will be.
Who will be the next to join TSB on 6%? It may be a longish wait for offers from the majors.
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 first bank to offer 6% for one year was SBS Bank, but their offer has now expired.)
The latest headline rate offers are in this table after the recent increases.
| for a $25,000 deposit May 12, 2023 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 4.10 | 5.35 | 5.40 | 5.70 | 5.30 | 5.20 | 5.10 |
 |
AA- | 4.10 | 5.40 | 5.45 | 5.70 | 5.40 | 5.40 | 5.30 |
 |
AA- | 4.10 | 5.35 | 5.40 | 5.70 | 5.35 | 5.30 | 5.20 |
 |
A | 4.05 | 5.30 | 5.25 | 5.75 | 5.20 | 5.00 | |
 |
AA- | 4.10 | 5.40 | 5.50 | 5.70 | 5.40 | 5.30 | 5.20 |
| Other banks | ||||||||
| Bank of China | A | 4.50 | 5.60 | 5.85 | 5.95 | 5.60 | 5.50 | 5.40 |
| China Constr. Bank | A | 4.70 | 5.60 | 5.85 | 5.95 | 5.85 | 5.45 | 5.45 |
| Co-operative Bank | BBB | 4.10 | 5.35 | 5.40 | 5.70 | 5.40 | 5.35 | 5.30 |
| Heartland Bank | BBB | 4.00 | 5.50 | 5.80 | 6.00 | 5.35 | 5.30 | 5.30 |
| HSBC | AA- | 3.95 | 5.10 | 5.30 | 5.40 | 5.20 | 5.00 | 5.00 |
| ICBC | A | 4.40 | 5.50 | 5.75 | 5.85 | 5.55 | 5.45 | 5.45 |
 |
A | 4.40 | 5.60 | 5.90 | 6.00 | 5.85 | 5.40 | 5.40 |
 |
BBB | 3.90 | 5.00 | 5.40 | 5.55 | 5.35 | 5.35 | 5.35 |
 |
A- | 4.25 | 5.20 | 5.40 | 6.00 | 5.30 | 5.30 | 5.10 |
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36 Comments
Wow 6%.. Looks like they know something which we don't. Rates are going to stay higher for longer. If a bank is offering more than 5% TD for 3 years which means they have to lend at more than 7% to make some money.
Looks like higher mortgage rates will remain there for longer.. Next 5 years are going to be fun.. Popcorn anyone
Grinding exceedingly slow….
But... the Depositor Compensation Scheme is expected to be working by late 2024. But will it be retrospective for existing term deposits? e.g. TSB’s 3 year offer.
I don't think the old government guarantee had a limit, or it may have been around a million. But that was over a decade ago and moneies buying power has lost value due to inflation. What's the bet they wont even adjust the coverage amount by inflation. So it provides less and less protection over time as the amount loses value. Yes IMO it should have matched Australias, but in NZD. Even then it would still be less when factoring in he exchange rate.
I don’t know enough about banks but would TSB be outside of the too big to fail and therefore a resk of OBR if they are over exposed to mortgages. Not sure if they do reverse mortgages and consumer finance but would be worth researching before putting money there.
What does OBR actually do?
It is a mechanism that keeps any stressed bank open for business until an arranged marriage is organised - that's all.
Do you reckon that given what's happening in the USA, and even what happened here with a non-bank entity, South Canterbury Finance, that any business with a banking licence here would be allowed to so utterly fail that creditor funds - retail deposits - are at risk?
If so, then 6% is nothing for any of our banks - from the largest to the smallest - compared to where they are going if that thinking becomes a reality.
So if you were Westpac, would you lend ANZ interbank funds - unsecured, in other words, if you thought that they'd get lost if ANZ failed?
Of course not. And that's why the OBR is merely a mechanism for transfer of assets and liabilities to another name. The New Zealand market is too small to allow any depositor funds to be lost by a Registered Bank. If that was probable then the banking system would disappear at current funding rates; think twice or more the current % rates - for the previous mentioned example.
Let's also remember what the OCR actually does.
The Reserve Bank acts as the central bank for most registered banks in New Zealand. These banks hold settlement accounts at the Reserve Bank. Settlement accounts are used to settle the obligations between the banks at the end of the day. The key to the system is the fact that the Reserve Bank doesn’t limit the amount of cash it will borrow or lend at rates related to the OCR. This means the banks won’t run out of money.
I don't think anyone even knows how OBR would work. Simple example would be funds held by another party, say your lawyers trust account. If that's takes a haircut in an OBR event does that mitigate a claim by me? And so on with any money owed.
The detail is not there, it would be a shambles.
Possibly, but the government is spending up large, would the public be open to debt to bail out depositors at a small bank, given this would lead to less money going to infrastructure. I don’t know but I think complete confidence in being bailed out is pushing it a bit.
It’s a good question, the OBR is a mechanism that manages a failed bank without the need for state assistance. It would be a big call to bail out TSB and set a precedent. There is simply no way I’d put my life savings with them. Regional banks are under stress in the US and Taranaki is not a “banking centre of excellence”.
You're not making sense. Why would you envisage TSB would be the only bank in trouble? Why not Kiwibank? What is it in particular that makes TSB and its Taranaki, Auckland and Waikato borrowers different from other banks? What has changed for TSB since the GFC?
Lets say you're right and there are no distressed sales in REA then from where would its bad debts originate and on such a scale to cause it and other banks to become insolvent?
TK. Get with the program. To much mihi whakatau bro!
TSB is a bank of excelence.
https://www.tsb.co.nz/about/news/consumer-award
Interest rates are inverted in the US and here and that has been a very good indicator of a coming recession. I think we will have a recession and that our OCR will start to fall, possibly early next year.
I have moved some TDs to 5, 4 and 2 year terms in anticipation of this. I have also bought Government stock and Local Authority Funding stock, both maturing in April '27. I have also reduced the percentage of equities in my portfolio. Of course, my situation is somewhat different to most. I am 78 and have stage 4 cancer, so long-term now has a somewhat different meaning.
Great stuff, its coming a few months later than I predicted but expect to see all the banks go 6% in just matter of weeks at the next review on 24th May. The OCR is going up it could be 25bps or probably another 50bps, either way its 6% at all the major banks by 1st July on a 12 month TD.
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