Co-op Bank raises 2 term deposit rates

The Co-operative Bank lifts 2 term deposit rates in expectation of OCR hikes and to meet customer demand

Personal Finance

The Co-operative Bank lifts 2 term deposit rates in expectation of OCR hikes and to meet customer demand

31st Jan 14, 12:16pm by Gareth Vaughan

By Gareth Vaughan

The Co-operative Bank has increased its six-month and one-year carded term deposit interest rates to rates among the best in the market with CEO Bruce McLachlan saying increases this year should track the expected rise in the Official Cash Rate closely.

Effective today Co-op Bank has in lifted its six-month carded, or advertised, term deposit rate by 20 basis points to 4%, and its one-year rate by 15 basis points to 4.25%.

McLachlan told interest.co.nz the increases are in part to meet depositors' expectations.

He noted that over the past year there had been a reasonable number of customers moving from term deposits to on-call savings products. This was partly due to attractive on-call products, but also because of publicity around likely interest rate rises.

"They (depositors) have been managing their interest rate exposure by bringing more of their deposits shorter in the short-term expecting a rise. We've certainly seen that," McLachlan said.

"Up to the end of December we've had pretty good deposit growth this (financial) year, but it certainly has been weighted more in the short-term."

The Reserve Bank held the OCR at 2.50% on Thursday but hinted strongly at rises from its next review on March 13. With market expectations for the OCR to rise about 125 basis points this year, McLachlan said he'd expect deposit rates to track in a similar way.

"If the Reserve Bank increased rates circa 1.25%, I would expect to see around that go on floating rate mortgages and around that go on the equivalent deposit rates. I doubt it'll be exactly that though," said McLachlan.

Meanwhile, ASB says to celebrate the Lunar New Year, it's offering a "limited time special" nine-month term deposit rate of 4.08% from today.

See all carded, or advertised term deposit rates for one to nine months here and see all carded, or advertised bank term deposit rates for one to five years here.

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3 Comments

by Anne | 31st Jan 14, 3:27pm 1391135264

Pleased to hear this. For a user-owned bank, the rates over the past year have been disappointing. There used to be a clear difference between PSIS and the nearest rival's.

Consequently, my deposits during the past year have largely migrated to a high earning on-call account with someone else. The interest paid there,even though it did drop a little, was paid MONTHLY and more importantly, allowed to COMPOUND and that folks makes the difference over time.

Fees have also climbed too much with the Coop Bank in the past year for those who must pay them.

by Weka | 3rd Feb 14, 3:10pm 1391393427

Completely agree with Anne, some of the on call rates are beating the higher rates (paid at maturity) as the on call accounts pay interest monthy and that compounds. Now if one of the banks offered a longer term 1 year + with monthly compounding interest then it would be a very attractive option. I have asked ANZ and Kiwibank about this possibility and they both refused. So my deposit is staying on-call for the time being...

by Bruce McLachlan | 3rd Feb 14, 5:59pm 1391403583

Thanks for your comments. Feedback is always welcomed and you can feel free to contact us directly if you are not satisfied.

First - as a co-operative we only have the long term interests of our membership at heart. Our decisioning is not about what is best for the Banks profit, but more what is a sustainable proposition for all. As far as Term Depost and major At Call product categories are concerned, we focus on consistency of pricing and we target to be at the top end of the range of all banks. In the year and a half that I have been here, I can asssure you all we have done that week in week out. We can never be certain that a large bank on any day may not have a better rate for that day. We can say we are consistenly at the top end.

Secondly, we do offer all major deposit product categories AND with the choice of monthly interest. In addition Ivan you are right - for the first time in 2013 we shared some of our profit with our customers. Yes for some, it was only $5 - for others it ran to hundreds of dollars and they were quite happy with that. That was only a start, and as our profit grows in future years we would expect under normal circumstances to significantly increase these payouts as well.

Our moving Term Deposit rates on Friday proves we are about having a consistently competivive offer - but more importantly demonstrates that a co-opertaive can manage through cycles and is not driven by short term profit impacts. Rewarding savers in a rising inflation enviroment seems the right thing to do right now.

Bruce McLachlan, Chief Executive Co-operative Bank