Another big bank has trimmed its term deposit rates, aligning them with their main rivals. But the overall trend is for lower TD rates. Savers should reassess their penchant for keeping their TD terms short

BNZ has trimmed some term deposit rates today (Wednesday).

For all the main banks and for all the main popular TD terms, these rates are now basically aligned as the same among all the big five, or within +/-5 bps.

No main bank has any 4% rates for terms less than three years.

Among the challenger banks, a 4% rate is now only available at Rabobank, for a six month term. This offer may not last very much longer, but it is still there to be taken advantage of.

Among community financial institutions, there is also only one who has a 4% rate, First Credit Union. But no others for terms less than three years.

But the offers at 4% or better are still widely available among finance companies. And given that the ones listed below all have Deposit Compensation Scheme (DCS) protection to $100,000, the risks of considering these options are much less than they have been prior to July 1, 2025 when the DCS protection started.

Among those finance companies, there is even one with an investment grade credit rating, Liberty Financial currently at BBB, which is the same as two challenger banks.

We should also note that the practical risk-free benchmark of Kiwi Bonds, which are directly guaranteed by the Government (not through the DCS), has last had its rates reviewed on July 3, 2025. Since then the average bank six month TD rate has fallen -13 bps and the average bank 12 month TD rate has eased -12 bps. No one knows when the Kiwi Bond rates will be next reviewed, but they are unlikely to be increased when they do.

But when they are reviewed next, it is probably a good bet they will be cut by at least -0.25%. That is because over the same period from July 3, one year swap rates have fallen -33 bps.

And given that wholesale shift, you have to credit banks (or the competitive nature of banking competition) for only easing down their term deposit rates by ~12 bps over the same timeframe.

The risk is, however, that there is plenty of downside for term deposit rates at present. As low as rates are currently, savers may like to think about locking in current rates for longer periods (24 months?) to avoid what seems to be an horizon that looks ever lower. Certainly if the New Zealand economy's struggles extend, it is hard to see loan demand picking up requiring banks to raise more funding.

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 institutions 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 calculate your expected net after-tax returns.

The latest headline term deposit rate offers are in this table after the recent changes over the past three weeks. The pink background colour-code of 5%+ rates has now vanished. The yellow colour code for those under 4% and has spread comprehensively. Bolded rates are the "best-bank", the highest carded rate from any bank at this time.

This table only lists institutions covered by the Depositor Compensation Scheme.

for a $25,000 deposit September 3, 2025	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Main banks
ANZ	AA-	3.35	3.75	3.70	3.70	3.70	3.75	4.00
	AA-	3.35	3.80	3.70	3.70	3.85	3.85	4.00
	AA-	3.35	3.80	3.70	3.75	3.70	3.75	4.00
	A	3.35	3.75	3.70	3.65		3.80	4.00
	AA-	3.35	3.75	3.70	3.70	3.75	3.85	4.10
Kiwi Bonds. 'risk-free'	AA+		3.00		3.00		3.25
	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Other banks
Bank of China	A	3.65	3.95	3.80	3.85	3.95	3.95	4.10
China Constr. Bank	A	3.25	3.50	3.50	3.50	3.60	3.65	3.75
Co-operative Bank	BBB+	3.20	3.75	3.65	3.65	3.75	3.80	4.05
Heartland Bank	BBB	3.50	3.90	3.85	3.80	3.85	3.90	4.00
ICBC	A	3.50	3.95	3.80	3.85	3.85	3.95	4.10
	A	3.50	4.00	3.85	3.90	3.90	3.85	4.00
	BBB	3.40	3.80	3.75	3.85	3.85	3.85	4.00
	BBB+	3.35	3.75	3.70	3.70	3.80	3.80	4.00
Non-Bank Deposit Takers	Rating	3/4 mths	5 / 6 / 7 mths	8 - 11 mths	1 yr	18mth	2 yrs	3 yrs
Community institutions
First Credit Union	BB	3.75	4.00	3.90	3.90	3.80	3.80
Heretaunga Bldg Society		3.45	3.90		3.85		3.95
Nelson Building Society	BB+	2.95	3.50	3.45	3.45	3.70	3.50	4.00
Police Credit Union	BB+	3.35	3.75	3.70	3.70	3.80	3.90
UnityMoney	BB	3.30	3.65	3.65	3.60	3.50	3.55	3.55
Wairarapa Bldg Society	BB+	3.50	3.80	3.80	3.85	3.80	3.80
Finance companies
Christian Savings	BB+	3.35	3.85	3.80	3.80	3.85	3.90	4.15
Finance Direct			3.75		4.10	4.25	4.65	4.15
General Finance	BB	3.90	4.25	4.25	4.50	4.50	4.25	4.25
Gold Band Finance	BB-		2.75	2.75	4.20	4.20	4.30	4.55
Liberty Financial	BBB	3.45	4.20	4.25	4.40	4.40	4.35	4.30
Mutual Credit Finance	B+				4.25	4.25	4.35	4.65
Xceda Finance	B+		4.20	4.25	4.35	4.40	4.25	4.15