The headlines feature the falling home loan interest rates. But term deposit rates are now falling just as fast, maybe even faster.
Many banks, both major and challenger, are cutting rates to savers, especially term deposit rates.
In fact, we are now on the verge of some term deposit rates falling below 3%. Most 30 day rates are down there already, some below 2%. But now 3 and 4 month rates look about ready to join them in this very low territory.
4% rates are now a distant memory. But there is still one from a bank lingering on - the 4.35% six month 'special' from SBS Bank. No other bank has a 4% rate for any term out to 3 years. And among the big banks, only BNZ has a 4% rate for a five year term.
The landscape has shifted to now where our table below will highlight those rates below 3% with a pink background.
Among the banks, Bank of China has the highest 3 month rate at 3.40%, SBS's 4.35% is the standout six month rate. The highest nine month rate is Rabobank's 3.60% rate. For 12 months, the highest bank current offer is also from Rabobank at 3.65%. Demand for deposits with a fixed term longer than one year is tiny with few savers enticed into this zone. But if you really would like to go long, BNZ's 4.00% five year rate is still available.
In the DCS-covered non-bank sector, none of the community institutions now offer 4% rates, and even among the finance companies with DCS coverage, 4% rates are rarer although four of the seven of these still have some over 4%.
We should also note that the practical risk-free benchmark of Kiwi Bonds, which are directly guaranteed by the Government (not through the DCS), now have sub-3% rates.
The risk is still that there is downside for term deposit rates at present. Certainly if the New Zealand economy's struggles extend, it is hard to see loan demand picking up requiring banks to raise more funding.
It does not help that CPI inflation is now at 3% and household living costs are rising faster, especially some components like electricity and rates. After-tax term deposit rate returns just cannot complete with those living cost pressures. It's not much fun being a saver at present. "Investing" in renters is currently a surefire way to lose twice (with falling rents and falling capital values). So the alternatives that can possibly supply inflation and tax-paid gains are now with the funds management sector.
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 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. The pink-coded rates ae those under 3%.
This table only lists institutions covered by the Depositor Compensation Scheme.
| for a $25,000 deposit October 21, 2025 |
Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Main banks | ||||||||
| ANZ | AA- | 3.10 | 3.45 | 3.40 | 3.40 | 3.40 | 3.45 | 3.60 |
 |
AA- | 3.00 | 3.40 | 3.40 | 3.40 | 3.40 | 3.45 | 3.65 |
 |
AA- | 3.10 | 3.55 | 3.45 | 3.50 | 3.45 | 3.50 | 3.70 |
 |
A | 3.20 | 3.70 | 3.50 | 3.50 | 3.60 | 3.80 | |
 |
AA- | 3.30 | 3.55 | 3.50 | 3.45 | 3.50 | 3.55 | 3.70 |
| Kiwi Bonds. 'risk-free' | AA+ | 2.50 | 2.50 | 2.75 | ||||
| Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs | |
| Other banks | ||||||||
| Bank of China | A | 3.40 | 3.70 | 3.55 | 3.55 | 3.60 | 3.65 | 3.90 |
| China Constr. Bank | A | 2.70 | 3.20 | 3.20 | 3.20 | 3.25 | 3.25 | 3.45 |
| Co-operative Bank | BBB+ | 3.15 | 3.60 | 3.50 | 3.50 | 3.55 | 3.60 | 3.80 |
| Heartland Bank | BBB | 3.30 | 3.60 | 3.55 | 3.55 | 3.55 | 3.60 | 3.80 |
| ICBC | A | 3.35 | 3.70 | 3.55 | 3.55 | 3.55 | 3.65 | 3.90 |
 |
A | 3.30 | 3.75 | 3.60 | 3.65 | 3.65 | 3.55 | 3.70 |
 |
BBB | 3.15 | 4.35 | 3.45 | 3.45 | 3.50 | 3.55 | 3.75 |
 |
BBB+ | 3.20 | 3.55 | 3.50 | 3.45 | 3.50 | 3.55 | 3.70 |
| Non-Bank Deposit Takers | Rating | 3/4 mths |
5 / 6 / 7 mths |
8 - 11 mths |
1 yr | 18mth | 2 yrs | 3 yrs |
| Community institutions with DCS protection | ||||||||
| First Credit Union | BB | 3.40 | 3.80 | 3.80 | 3.80 | 3.70 | 3.70 | |
| Heretaunga Bldg Society | 3.30 | 3.70 | 3.60 | 3.70 | ||||
| Nelson Building Society | BB+ | 2.85 | 3.30 | 3.20 | 3.20 | 3.50 | 3.30 | 3.70 |
| Police Credit Union | BB+ | 3.20 | 3.55 | 3.50 | 3.45 | 3.50 | 3.55 | |
| UnityMoney | BB | 3.15 | 3.40 | 3.35 | 3.30 | 3.35 | 3.45 | 3.45 |
| Wairarapa Bldg Society | BB+ | 3.20 | 3.45 | 3.45 | 3.50 | 3.45 | 3.45 | |
| Finance companies with DCS protection | ||||||||
| Christian Savings | BB+ | 3.20 | 3.65 | 3.60 | 3.55 | 3.60 | 3.65 | 3.85 |
| Finance Direct | 3.25 | 3.80 | 4.00 | 4.15 | 3.85 | |||
| General Finance | BB | 3.55 | 3.80 | 3.90 | 4.05 | 4.05 | 3.90 | 3.90 |
| Gold Band Finance | BB- | 2.75 | 2.75 | 4.00 | 4.00 | 4.05 | 4.20 | |
| Liberty Financial | BBB | 2.95 | 3.30 | 3.20 | 3.90 | 3.90 | 3.85 | 3.80 |
| Mutual Credit Finance | B+ | 3.30 | 3.30 | 3.40 | 3.50 | |||
| Xceda Finance | B+ | 4.05 | 4.10 | 4.00 | 3.95 | 3.90 | 3.95 | |
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15 Comments
CPI linked government bonds
2050 maturity 3.10% + CPI so that right now with inflation at 3.00% yielding 6.10% government risk
CPI will ebb and flow but long term average is 2.60%
Wholesale only, minimum $1M & the pain of having to deal via Computershare - as with Kiwibond. Surely with RealMe there's no reason for individual investors not to be able to deal with our own Govt directly
Wholesale only, minimum $1M & the pain of having to deal via Computershare - as with Kiwibond. Surely with RealMe there's no reason for individual investors not to be able to deal with our own Govt directly
Yes. Absolutely no reason why this is technically impossible. All that's lacking is willpower.
In other words term deposit saves are forced to look at other forms of investment in order to stop losing money.
Where will most invest their money in?
Last time rates dropped the money was just left sitting in call accounts. It wasn't even worth the effort to switch it and get taxed. Difference on $100k was maybe a few $100 a year after tax with your money locked up for the duration.
I meant invest out of banks, and into.... Real Estate ? Gold ? Shares ?
Lots of the steady dividend payers on the NZX seem to have benefited recently from people bidding up the yield. And obviously gold is going a bit wild.
Unfortunately I fear real estate may follow next year, but for the sake of society I hope residential isn't affected too much. As per the recent article on here, the DTIs should help keep a cap on things.
"Lots of the steady dividend payers on the NZX seem to have benefited recently from people bidding up the yield"
Such as ?
I do think too that real estate in NZ will rise again next year (I have no longer any skin in this game), but interest rate cuts, which take a long time to affect property, will re-ignite this fire.
I'm thinking of the REITs (which also goes to the real estate point, although mostly commercial and industrial), KPG and ARG up 24 and 29% this calendar year. I thought the Gentailers would be another but they're a mixed bag - Genesis and Mercury up 18% but Meridian only 3% and Contact 2%. Heartland has been on a good run too for various reasons, but likely including the dividend looking more appealing as rates fall. I don't own them, but Vector are up 26% and they should be a pretty dull, steady utility.
If you're looking for high dividend yield that matches / outperforms term deposits, NZ High Dividend Yield returns 6–7% per year over the medium term. 12.7% YTD suggesting people looking for alternatives to bank deposits. And a liquid asset.
In other words term deposit saves are forced to look at other forms of investment in order to stop losing money.
Where will most invest their money in?
Well Dr Y, what if they could save in non-interest bearing gold custodied by the bank? Fiat equivalents.
But this is antithesis to what banks represent. They're not in the business of custodial saving of your money. And most people don't understand that. And that they're very much an unsecured creditor. It's not taught in school and not communicated by banks.
A bit of an eye opener when1kg of Gold, which is not large due to its density, is about 1/4 of a million dollars !
PMGOLD. But it's not similar to a non-interest bearing bank account.
https://www.perthmint.com/invest/depository-online/
...govt guaranteed as well. No GST or OBR nonsense. No IRD number required either
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