The relentless trimming of bank term deposit rate cards has most of them on the cusp of falling below 5% for all terms

BNZ has trimmed a small set of term deposit rates, following recent reductions by both Kiwibank and Rabobank.

And next week we are almost certain there will be more term deposit rate cuts.

Apart from two Chinese owned banks, the highest rate offer is now 5.15% from the Co-operative Bank or Heartland Bank for a six month term. That is a long way down from where we started the year where 6% rates were almost universal.

But rate cuts for savers have come regularly over the past three months, mostly in small amounts so as not to attract too much attention.

If you haven't locked in a 5% rate by the middle of next week, you may be too late. When we come back from our holiday break, it would be no surprise to find no term deposit rate offers of 5% or more. None.

Loan demand isn't improving and that undermines how much banks want to compete for savers.

We had recently noted some respected analysts were saying short term wholesale swap rates are unlikely to move down much from where they are now. But in fact over the past week short swap rates have continued to move lower, so even those who follow these things closely may have got the trend estimate wrong.

When we return from holidays, there will be an expected Reserve Bank Official Cash Rate cut in February, currently priced by financial markets at 50 basis points. So that probably means wholesale pressures for lower rates will persist.

With international long rates firming, and local short rates having more downside, the rate curve inversion could vanish relatively quickly. It would not be a surprise to come back after the holiday period to find it gone.

Our table below highlights rate offers of 5% or better. In a falling market, it might seem attractive to lock in rates for a bit longer.

Wholesale rates are all trending lower, especially for short-terms, as you can see here and here.

When you invest, always check how interest is compounded. Depending on how much you are committing, compounding more often is materially better. But some banks advertise their "interest at maturity" rates different to their compounding rates, which for some can be set a little lower. Both Kiwibank and Rabobank do this, although most other main banks don't.

Use the calculator at the foot of this article to see the differences.

We should also point out that after-tax returns can be enhanced for some savers with higher tax rates, by the choice of PIE structures. Not all banks offer these, but most of the main banks do. For a nine month bank offer, they can be boosted by about 30 basis points going this way. In some cases that will make up any difference, or more.

Always ask a bank for a better rate. Many bank staff have discretion to offer more than the advertised rate. (And check your bank's app offers as they too are often enhanced to retain you). But in this environment don't get your hopes up for a positive response. Carded rates are likely to now be the 'best rate', except in quite special circumstances.

Use the term deposit calculator here, or the one below the table, to calculator your expected net returns.

The latest headline term deposit rate offers are in this table after the recent changes over the past week. The background colour-code indicates 5%+ rates still available.  (Updated with BNZ reductions.)

for a $25,000 deposit December 12, 2024	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	4.25	5.05	4.90	4.75	4.55	4.45	4.35
	AA-	4.25	5.05	4.90	4.75	4.55	4.35	4.35
	AA-	4.20	5.10	4.90	4.75	4.55	4.35	4.40
	A	4.40	5.10	4.90	4.80		4.50	4.40
	AA-	4.25	5.05	5.00	4.75	4.60	4.40	4.40
Kiwi Bonds. 'risk-free'	AA+		4.50		4.25		3.75
	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Other banks
Bank of China	A	4.60	5.35	5.20	5.00	4.75	4.55	4.45
China Constr. Bank	A	4.45	4.95	4.85	4.80	4.70	4.45	4.40
Co-operative Bank	BBB	4.15	5.15	4.90	4.80	4.60	4.50	4.40
Heartland Bank	BBB	4.65	5.15	5.00	4.85	4.65	4.50	4.40
ICBC	A	4.65	5.35	5.05	4.95	4.75	4.55	4.40
	A	4.35	5.10	4.95	4.90	4.65	4.40	4.40
	BBB	4.25	5.10	5.00	4.80	4.50	4.50	4.50
	BBB+	4.25	5.05	4.90	4.75	4.55	4.40	4.40