Westpac's 6% nine month TD rate shifts a main bank into the heart of where savers want to commit for term savings, and close to where challenger banks have already gone

A the end of August, Kiwibank became the first main bank to offer a 6% pa term deposit rate for a one year term. Other main banks quickly fell into line and now all main banks offer that for either 12 or 18 months. Of course, the main banks all followed challenger banks who got there much earlier.

Now, also following challenger banks, Westpac has become the first main bank to offer 6% for a term less than one year. For nine months, in fact.

There hasn't been a main bank rate this high for a nine month term for 15 years.

This may an even more important shift than the one year breach. And that is because savers prefer terms less than 1 year.

RBNZ data (L3) shows that 31% of all TD investments are for a fixed term of "> 6 months & <= 1 year", 32.6% is "> 3 months & <= 6 months", and 29.7% is "> 1 month & <= 3 months". So, from 1 month to 1 year terms, that accounts for a dominant 93% of all TD investment, with 62% of it 6 months or shorter.

In a data series that goes bank to 2011, savers have gradually lengthen their terms. The 6-12 month term bucket has gone from under 20% of all TD savings to now over 30% share, while the 1-3 month share has gone from almost 40% share to under 30% now. The proportion in 3-6 month TDs is little-changed.

Six percent rates for less than a year brings into play the $54 bln of TD savings in the 3-6 month category, the biggest single category. Yes, Westpac's offer is for a 9 month term, but you can be sure those with savings in the six month range will be tempted to get what they wouldn't do for 12 months. The banks are coming for them, rather than the other way around.

Also in play are increasing amounts of KiwiSaver withdrawals. No matter where they are moved from, they become attractive as a way to establish a relationship with customers of other banks.

And with Westpac in the market with a 6% carded rate for a nine month term, the other big banks will be open to negotiation and possible matching.

Update: Kiwibank has raised term deposit rates too, taking their headline one year rate offer to 6.05% and the highest of the  main banks for that term. (They also raised home loan rates.)

This is good news for savers, but borrowers will be squirming. As the 6% benchmark moves to ever shorter terms they is no way banks can keep their fixed term home loan rates unchanged. The pressure will be on to raise those too.

Savers and borrowers alike should remember you can negotiate with any bank over their carded rate offers. You won't get a better rate if you don't ask. Whether a better rate is offered to you is up to the bank, and their perceptions of you, your financial situation and how important they feel it is to gain or retain your business. Many bank officers have some minor discretion on rates.

One risk savers should watch is the cost of wholesale money and you can do that by looking at swap rates. You can do that here. Wholesale swap rates jumped recently, and we detailed those shifts here.

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.

* Kookmin Bank's 6.10% one year offer is for deposits of $100,000 and more. For a $10,000 minimum it is 6.00%.

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

for a $25,000 deposit September 25, 2023	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	4.30	5.85	5.85	6.00	6.00	5.70	5.25
	AA-	4.20	5.85	5.85	6.00	6.00	5.90	5.80
	AA-	4.30	5.85	5.85	6.00	5.90	5.70	5.25
	A	4.40 +0.20	5.90 +0.05	5.90 +0.05	6.05 +0.05		5.70	5.20
	AA-	4.30	5.80	6.00 +0.15	5.90 -0.05	5.80	6.00	5.50
Other banks
Bank of China	A	5.00	5.90	6.00	6.10	6.10	6.00	5.60
China Constr. Bank	A	5.00	5.90	6.00	6.10	6.00	5.80	5.50
Co-operative Bank	BBB	4.20	5.85	5.90	6.00	6.00	5.90	5.60
Heartland Bank	BBB	5.50	5.90	6.00	6.10	5.90	5.90	5.85
ICBC	A	4.80	5.90	6.00	6.05	5.85	5.55	5.40
Kookmin Bank	A	4.40	5.60	5.70	6.00*		5.20	5.20
	A	5.05	6.00	6.05	6.25	6.05	6.00	5.70
	BBB	4.20	5.85	5.70	6.00	5.35	5.35	5.35
	A-	4.25	5.75	5.80	6.00	6.00	5.70	5.50